Correlation Between MetaLabs and Daedong Steel

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

By analyzing existing cross correlation between MetaLabs Co and Daedong Steel Co, you can compare the effects of market volatilities on MetaLabs and Daedong Steel 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 MetaLabs with a short position of Daedong Steel. Check out your portfolio center. Please also check ongoing floating volatility patterns of MetaLabs and Daedong Steel.

Diversification Opportunities for MetaLabs and Daedong Steel

0.86

Correlation Coefficient

MetaLabs  Daedong Steel

Very poor diversification

The 3 months correlation between MetaLabs and Daedong is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding MetaLabs Co and Daedong Steel Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Daedong Steel and MetaLabs 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 MetaLabs Co are associated (or correlated) with Daedong Steel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Daedong Steel has no effect on the direction of MetaLabs i.e., MetaLabs and Daedong Steel go up and down completely randomly.

Pair Corralation between MetaLabs and Daedong Steel

Assuming the 90 days trading horizon MetaLabs Co is expected to generate 1.95 times more return on investment than Daedong Steel. However, MetaLabs is 1.95 times more volatile than Daedong Steel Co. It trades about 0.07 of its potential returns per unit of risk. Daedong Steel Co is currently generating about -0.16 per unit of risk. If you would invest  128,300  in MetaLabs Co on October 13, 2024 and sell it today you would earn a total of  3,700  from holding MetaLabs Co or generate 2.88% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	95.0%
Values	Daily Returns

MetaLabs Co  vs.  Daedong Steel Co

MetaLabs

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days MetaLabs Co has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Daedong Steel

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Daedong Steel Co has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with MetaLabs and Daedong Steel

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

The idea behind MetaLabs Co and Daedong Steel Co 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.