Correlation Between DukSan Neolux and Dongwon Metal

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

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

Diversification Opportunities for DukSan Neolux and Dongwon Metal

0.78

Correlation Coefficient

DukSan Neolux  Dongwon Metal

Poor diversification

The 3 months correlation between DukSan and Dongwon is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding DukSan Neolux CoLtd and Dongwon Metal Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dongwon Metal and DukSan Neolux 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 DukSan Neolux CoLtd are associated (or correlated) with Dongwon Metal. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dongwon Metal has no effect on the direction of DukSan Neolux i.e., DukSan Neolux and Dongwon Metal go up and down completely randomly.

Pair Corralation between DukSan Neolux and Dongwon Metal

Assuming the 90 days trading horizon DukSan Neolux is expected to generate 3.08 times less return on investment than Dongwon Metal. But when comparing it to its historical volatility, DukSan Neolux CoLtd is 2.48 times less risky than Dongwon Metal. It trades about 0.13 of its potential returns per unit of risk. Dongwon Metal Co is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest  108,500  in Dongwon Metal Co on December 1, 2024 and sell it today you would earn a total of  92,000  from holding Dongwon Metal Co or generate 84.79% return on investment over 90 days.

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

DukSan Neolux CoLtd  vs.  Dongwon Metal Co

DukSan Neolux CoLtd

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in DukSan Neolux CoLtd are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, DukSan Neolux sustained solid returns over the last few months and may actually be approaching a breakup point.

Dongwon Metal

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Dongwon Metal Co are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Dongwon Metal sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with DukSan Neolux and Dongwon Metal

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

The idea behind DukSan Neolux CoLtd and Dongwon 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.