Correlation Between Seah Steel and Dong Il

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

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

Diversification Opportunities for Seah Steel and Dong Il

-0.72

Correlation Coefficient

Seah Steel  Dong Il

Pay attention - limited upside

The 3 months correlation between Seah and Dong is -0.72. Overlapping area represents the amount of risk that can be diversified away by holding Seah Steel Corp and Dong Il Steel in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dong Il Steel and Seah Steel 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 Seah Steel Corp are associated (or correlated) with Dong Il. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dong Il Steel has no effect on the direction of Seah Steel i.e., Seah Steel and Dong Il go up and down completely randomly.

Pair Corralation between Seah Steel and Dong Il

Assuming the 90 days trading horizon Seah Steel Corp is expected to generate 2.33 times more return on investment than Dong Il. However, Seah Steel is 2.33 times more volatile than Dong Il Steel. It trades about 0.26 of its potential returns per unit of risk. Dong Il Steel is currently generating about -0.06 per unit of risk. If you would invest  11,443,200  in Seah Steel Corp on December 31, 2024 and sell it today you would earn a total of  6,856,800  from holding Seah Steel Corp or generate 59.92% return on investment over 90 days.

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

Seah Steel Corp  vs.  Dong Il Steel

Seah Steel Corp

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Seah Steel Corp are ranked lower than 20 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Seah Steel sustained solid returns over the last few months and may actually be approaching a breakup point.

Dong Il Steel

Risk-Adjusted Performance

Very Weak

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

Pair Trading with Seah Steel and Dong Il

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

The idea behind Seah Steel Corp and Dong Il Steel 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.