Correlation Between Dong A and Han Kook

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

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

Diversification Opportunities for Dong A and Han Kook

0.35

Correlation Coefficient

Dong A  Han Kook

Weak diversification

The 3 months correlation between Dong and Han is 0.35. Overlapping area represents the amount of risk that can be diversified away by holding Dong A Eltek and Han Kook Capital in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Han Kook Capital and Dong A 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 Dong A Eltek are associated (or correlated) with Han Kook. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Han Kook Capital has no effect on the direction of Dong A i.e., Dong A and Han Kook go up and down completely randomly.

Pair Corralation between Dong A and Han Kook

Assuming the 90 days trading horizon Dong A Eltek is expected to under-perform the Han Kook. In addition to that, Dong A is 2.75 times more volatile than Han Kook Capital. It trades about -0.12 of its total potential returns per unit of risk. Han Kook Capital is currently generating about -0.02 per unit of volatility. If you would invest  57,300  in Han Kook Capital on September 19, 2024 and sell it today you would lose (700.00) from holding Han Kook Capital or give up 1.22% of portfolio value over 90 days.

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

Dong A Eltek  vs.  Han Kook Capital

Dong A Eltek

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Dong A Eltek are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Dong A sustained solid returns over the last few months and may actually be approaching a breakup point.

Han Kook Capital

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Dong A and Han Kook

The main advantage of trading using opposite Dong A and Han Kook positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dong A position performs unexpectedly, Han Kook 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 Han Kook will offset losses from the drop in Han Kook's long position.

The idea behind Dong A Eltek and Han Kook Capital 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.