Correlation Between Duksan Hi and Dong A

Can any of the company-specific risk be diversified away by investing in both Duksan Hi 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 Duksan Hi and Dong A into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Duksan Hi Metal and Dong A Steel Technology, you can compare the effects of market volatilities on Duksan Hi 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 Duksan Hi with a short position of Dong A. Check out your portfolio center. Please also check ongoing floating volatility patterns of Duksan Hi and Dong A.

Diversification Opportunities for Duksan Hi and Dong A

0.43

Correlation Coefficient

Duksan Hi  Dong A

Very weak diversification

The 3 months correlation between Duksan and Dong is 0.43. Overlapping area represents the amount of risk that can be diversified away by holding Duksan Hi Metal 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 Duksan Hi 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 Duksan Hi Metal 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 Duksan Hi i.e., Duksan Hi and Dong A go up and down completely randomly.

Pair Corralation between Duksan Hi and Dong A

Assuming the 90 days trading horizon Duksan Hi Metal is expected to generate 1.33 times more return on investment than Dong A. However, Duksan Hi is 1.33 times more volatile than Dong A Steel Technology. It trades about 0.13 of its potential returns per unit of risk. Dong A Steel Technology is currently generating about 0.03 per unit of risk. If you would invest  383,000  in Duksan Hi Metal on December 24, 2024 and sell it today you would earn a total of  69,000  from holding Duksan Hi Metal or generate 18.02% return on investment over 90 days.

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

Duksan Hi Metal  vs.  Dong A Steel Technology

Duksan Hi Metal

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Duksan Hi Metal are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Duksan Hi sustained solid returns over the last few months and may actually be approaching a breakup point.

Dong A Steel

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Dong A Steel Technology are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. 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 Duksan Hi and Dong A

The main advantage of trading using opposite Duksan Hi and Dong A positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Duksan Hi 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 Duksan Hi Metal 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.

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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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.