Correlation Between DONGKUK TED and Hwasung Industrial

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

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

Diversification Opportunities for DONGKUK TED and Hwasung Industrial

0.08

Correlation Coefficient

DONGKUK TED  Hwasung Industrial

Significant diversification

The 3 months correlation between DONGKUK and Hwasung is 0.08. Overlapping area represents the amount of risk that can be diversified away by holding DONGKUK TED METAL and Hwasung Industrial Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hwasung Industrial and DONGKUK TED 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 DONGKUK TED METAL are associated (or correlated) with Hwasung Industrial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hwasung Industrial has no effect on the direction of DONGKUK TED i.e., DONGKUK TED and Hwasung Industrial go up and down completely randomly.

Pair Corralation between DONGKUK TED and Hwasung Industrial

Assuming the 90 days trading horizon DONGKUK TED is expected to generate 12.25 times less return on investment than Hwasung Industrial. But when comparing it to its historical volatility, DONGKUK TED METAL is 1.15 times less risky than Hwasung Industrial. It trades about 0.01 of its potential returns per unit of risk. Hwasung Industrial Co is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest  854,095  in Hwasung Industrial Co on October 23, 2024 and sell it today you would earn a total of  144,905  from holding Hwasung Industrial Co or generate 16.97% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	98.39%
Values	Daily Returns

DONGKUK TED METAL  vs.  Hwasung Industrial Co

DONGKUK TED METAL

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in DONGKUK TED METAL are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, DONGKUK TED is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Hwasung Industrial

Risk-Adjusted Performance

10 of 100

OK

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

Pair Trading with DONGKUK TED and Hwasung Industrial

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

The idea behind DONGKUK TED METAL and Hwasung Industrial 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.