Correlation Between System and Dong A

Can any of the company-specific risk be diversified away by investing in both System and Dong A at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining System and Dong A into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between System and Application and Dong A Steel Technology, you can compare the effects of market volatilities on System and Dong A and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in System with a short position of Dong A. Check out your portfolio center. Please also check ongoing floating volatility patterns of System and Dong A.

Diversification Opportunities for System and Dong A

-0.36

Correlation Coefficient

System  Dong A

Very good diversification

The 3 months correlation between System and Dong is -0.36. Overlapping area represents the amount of risk that can be diversified away by holding System and Application and Dong A Steel Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dong A Steel and System is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on System and Application are associated (or correlated) with Dong A. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dong A Steel has no effect on the direction of System i.e., System and Dong A go up and down completely randomly.

Pair Corralation between System and Dong A

Assuming the 90 days trading horizon System and Application is expected to generate 1.14 times more return on investment than Dong A. However, System is 1.14 times more volatile than Dong A Steel Technology. It trades about 0.08 of its potential returns per unit of risk. Dong A Steel Technology is currently generating about -0.01 per unit of risk. If you would invest  140,536  in System and Application on October 6, 2024 and sell it today you would earn a total of  14,964  from holding System and Application or generate 10.65% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

System and Application  vs.  Dong A Steel Technology

System and Application

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in System and Application are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, System may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Dong A Steel

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Dong A Steel Technology has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Dong A is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with System and Dong A

The main advantage of trading using opposite System and Dong A positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if System position performs unexpectedly, Dong A can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Dong A will offset losses from the drop in Dong A's long position.

The idea behind System and Application and Dong A Steel Technology pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

Check out your portfolio center.

Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..