Correlation Between DONGKUK STEEL and SBI Investment

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

By analyzing existing cross correlation between DONGKUK STEEL MILL and SBI Investment KOREA, you can compare the effects of market volatilities on DONGKUK STEEL and SBI Investment 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 STEEL with a short position of SBI Investment. Check out your portfolio center. Please also check ongoing floating volatility patterns of DONGKUK STEEL and SBI Investment.

Diversification Opportunities for DONGKUK STEEL and SBI Investment

-0.16

Correlation Coefficient

DONGKUK STEEL  SBI Investment

Good diversification

The 3 months correlation between DONGKUK and SBI is -0.16. Overlapping area represents the amount of risk that can be diversified away by holding DONGKUK STEEL MILL and SBI Investment KOREA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SBI Investment KOREA and DONGKUK 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 DONGKUK STEEL MILL are associated (or correlated) with SBI Investment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SBI Investment KOREA has no effect on the direction of DONGKUK STEEL i.e., DONGKUK STEEL and SBI Investment go up and down completely randomly.

Pair Corralation between DONGKUK STEEL and SBI Investment

Assuming the 90 days trading horizon DONGKUK STEEL MILL is expected to under-perform the SBI Investment. But the stock apears to be less risky and, when comparing its historical volatility, DONGKUK STEEL MILL is 2.48 times less risky than SBI Investment. The stock trades about -0.09 of its potential returns per unit of risk. The SBI Investment KOREA is currently generating about 0.24 of returns per unit of risk over similar time horizon. If you would invest  68,900  in SBI Investment KOREA on September 4, 2024 and sell it today you would earn a total of  19,000  from holding SBI Investment KOREA or generate 27.58% return on investment over 90 days.

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

DONGKUK STEEL MILL  vs.  SBI Investment KOREA

DONGKUK STEEL MILL

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in DONGKUK STEEL MILL are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, DONGKUK STEEL is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

SBI Investment KOREA

Risk-Adjusted Performance

7 of 100

Very Weak

Compared to the overall equity markets, risk-adjusted returns on investments in SBI Investment KOREA are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, SBI Investment sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with DONGKUK STEEL and SBI Investment

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

The idea behind DONGKUK STEEL MILL and SBI Investment KOREA 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.