Correlation Between DONGKUK COATED and Raontech

Can any of the company-specific risk be diversified away by investing in both DONGKUK COATED and Raontech 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 COATED and Raontech 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 Raontech, you can compare the effects of market volatilities on DONGKUK COATED and Raontech 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 COATED with a short position of Raontech. Check out your portfolio center. Please also check ongoing floating volatility patterns of DONGKUK COATED and Raontech.

Diversification Opportunities for DONGKUK COATED and Raontech

0.71

Correlation Coefficient

DONGKUK COATED  Raontech

Poor diversification

The 3 months correlation between DONGKUK and Raontech is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding DONGKUK TED METAL and Raontech in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Raontech and DONGKUK COATED 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 Raontech. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Raontech has no effect on the direction of DONGKUK COATED i.e., DONGKUK COATED and Raontech go up and down completely randomly.

Pair Corralation between DONGKUK COATED and Raontech

Assuming the 90 days trading horizon DONGKUK TED METAL is expected to generate 0.67 times more return on investment than Raontech. However, DONGKUK TED METAL is 1.5 times less risky than Raontech. It trades about -0.04 of its potential returns per unit of risk. Raontech is currently generating about -0.05 per unit of risk. If you would invest  693,000  in DONGKUK TED METAL on September 21, 2024 and sell it today you would lose (90,000) from holding DONGKUK TED METAL or give up 12.99% of portfolio value over 90 days.

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

DONGKUK TED METAL  vs.  Raontech

DONGKUK TED METAL

Risk-Adjusted Performance

0 of 100

Very Weak

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

Raontech

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Raontech has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with DONGKUK COATED and Raontech

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

The idea behind DONGKUK TED METAL and Raontech 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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.