Correlation Between Dongil Metal and Dongbang Ship

Can any of the company-specific risk be diversified away by investing in both Dongil Metal and Dongbang Ship 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 Dongbang Ship 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 Dongbang Ship Machinery, you can compare the effects of market volatilities on Dongil Metal and Dongbang Ship 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 Dongbang Ship. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dongil Metal and Dongbang Ship.

Diversification Opportunities for Dongil Metal and Dongbang Ship

-0.51

Correlation Coefficient

Dongil Metal  Dongbang Ship

Excellent diversification

The 3 months correlation between Dongil and Dongbang is -0.51. Overlapping area represents the amount of risk that can be diversified away by holding Dongil Metal Co and Dongbang Ship Machinery in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dongbang Ship Machinery 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 Dongbang Ship. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dongbang Ship Machinery has no effect on the direction of Dongil Metal i.e., Dongil Metal and Dongbang Ship go up and down completely randomly.

Pair Corralation between Dongil Metal and Dongbang Ship

Assuming the 90 days trading horizon Dongil Metal Co is expected to under-perform the Dongbang Ship. But the stock apears to be less risky and, when comparing its historical volatility, Dongil Metal Co is 3.01 times less risky than Dongbang Ship. The stock trades about -0.12 of its potential returns per unit of risk. The Dongbang Ship Machinery is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  298,000  in Dongbang Ship Machinery on September 22, 2024 and sell it today you would earn a total of  10,500  from holding Dongbang Ship Machinery or generate 3.52% 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.  Dongbang Ship Machinery

Dongil Metal

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Dongil Metal 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 January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Dongbang Ship Machinery

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Dongbang Ship Machinery are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Dongbang Ship sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Dongil Metal and Dongbang Ship

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

The idea behind Dongil Metal Co and Dongbang Ship Machinery 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 Global Correlations module to find global opportunities by holding instruments from different markets.