Correlation Between Dongil Metal and Daiyang Metal

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

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

Diversification Opportunities for Dongil Metal and Daiyang Metal

-0.58

Correlation Coefficient

Dongil Metal  Daiyang Metal

Excellent diversification

The 3 months correlation between Dongil and Daiyang is -0.58. Overlapping area represents the amount of risk that can be diversified away by holding Dongil Metal Co and Daiyang Metal Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Daiyang Metal and Dongil Metal 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 Dongil Metal Co are associated (or correlated) with Daiyang Metal. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Daiyang Metal has no effect on the direction of Dongil Metal i.e., Dongil Metal and Daiyang Metal go up and down completely randomly.

Pair Corralation between Dongil Metal and Daiyang Metal

Assuming the 90 days trading horizon Dongil Metal Co is expected to generate 0.82 times more return on investment than Daiyang Metal. However, Dongil Metal Co is 1.22 times less risky than Daiyang Metal. It trades about 0.12 of its potential returns per unit of risk. Daiyang Metal Co is currently generating about -0.02 per unit of risk. If you would invest  797,207  in Dongil Metal Co on November 29, 2024 and sell it today you would earn a total of  109,793  from holding Dongil Metal Co or generate 13.77% return on investment over 90 days.

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

Dongil Metal Co  vs.  Daiyang Metal Co

Dongil Metal

Risk-Adjusted Performance

OK

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

Daiyang Metal

Risk-Adjusted Performance

Very Weak

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

Pair Trading with Dongil Metal and Daiyang Metal

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

The idea behind Dongil Metal Co and Daiyang Metal 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.

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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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.