Correlation Between Dongbang Ship and Dongbu Insurance

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

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

Diversification Opportunities for Dongbang Ship and Dongbu Insurance

-0.47

Correlation Coefficient

Dongbang Ship  Dongbu Insurance

Very good diversification

The 3 months correlation between Dongbang and Dongbu is -0.47. Overlapping area represents the amount of risk that can be diversified away by holding Dongbang Ship Machinery and Dongbu Insurance Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dongbu Insurance and Dongbang Ship 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 Dongbang Ship Machinery are associated (or correlated) with Dongbu Insurance. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dongbu Insurance has no effect on the direction of Dongbang Ship i.e., Dongbang Ship and Dongbu Insurance go up and down completely randomly.

Pair Corralation between Dongbang Ship and Dongbu Insurance

Assuming the 90 days trading horizon Dongbang Ship Machinery is expected to generate 1.51 times more return on investment than Dongbu Insurance. However, Dongbang Ship is 1.51 times more volatile than Dongbu Insurance Co. It trades about 0.03 of its potential returns per unit of risk. Dongbu Insurance Co is currently generating about -0.06 per unit of risk. If you would invest  305,500  in Dongbang Ship Machinery on December 30, 2024 and sell it today you would earn a total of  8,000  from holding Dongbang Ship Machinery or generate 2.62% return on investment over 90 days.

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

Dongbang Ship Machinery  vs.  Dongbu Insurance Co

Dongbang Ship Machinery

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Dongbang Ship Machinery are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Dongbang Ship is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Dongbu Insurance

Risk-Adjusted Performance

Very Weak

Over the last 90 days Dongbu Insurance Co has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Dongbang Ship and Dongbu Insurance

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

The idea behind Dongbang Ship Machinery and Dongbu Insurance 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.