Correlation Between Top Material and Dongil Metal

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

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

Diversification Opportunities for Top Material and Dongil Metal

0.44

Correlation Coefficient

Top Material  Dongil Metal

Very weak diversification

The 3 months correlation between Top and Dongil is 0.44. Overlapping area represents the amount of risk that can be diversified away by holding Top Material Co and Dongil Metal Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dongil Metal and Top Material 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 Top Material Co are associated (or correlated) with Dongil Metal. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dongil Metal has no effect on the direction of Top Material i.e., Top Material and Dongil Metal go up and down completely randomly.

Pair Corralation between Top Material and Dongil Metal

Assuming the 90 days trading horizon Top Material Co is expected to under-perform the Dongil Metal. In addition to that, Top Material is 2.29 times more volatile than Dongil Metal Co. It trades about -0.06 of its total potential returns per unit of risk. Dongil Metal Co is currently generating about 0.11 per unit of volatility. If you would invest  820,961  in Dongil Metal Co on October 25, 2024 and sell it today you would earn a total of  84,039  from holding Dongil Metal Co or generate 10.24% return on investment over 90 days.

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

Top Material Co  vs.  Dongil Metal Co

Top Material

Risk-Adjusted Performance

0 of 100

Very Weak

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

Dongil Metal

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Dongil Metal Co are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Dongil Metal may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Top Material and Dongil Metal

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

The idea behind Top Material Co and Dongil 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.