Correlation Between DONGKUK STEEL and AFW

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

Diversification Opportunities for DONGKUK STEEL and AFW

-0.1

Correlation Coefficient

DONGKUK STEEL  AFW

Good diversification

The 3 months correlation between DONGKUK and AFW is -0.1. Overlapping area represents the amount of risk that can be diversified away by holding DONGKUK STEEL MILL and AFW Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AFW Co 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 AFW. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AFW Co has no effect on the direction of DONGKUK STEEL i.e., DONGKUK STEEL and AFW go up and down completely randomly.

Pair Corralation between DONGKUK STEEL and AFW

Assuming the 90 days trading horizon DONGKUK STEEL MILL is expected to generate 0.37 times more return on investment than AFW. However, DONGKUK STEEL MILL is 2.68 times less risky than AFW. It trades about 0.13 of its potential returns per unit of risk. AFW Co is currently generating about 0.03 per unit of risk. If you would invest  767,419  in DONGKUK STEEL MILL on December 31, 2024 and sell it today you would earn a total of  144,581  from holding DONGKUK STEEL MILL or generate 18.84% 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.  AFW Co

DONGKUK STEEL MILL

Risk-Adjusted Performance

OK

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

AFW Co

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in AFW Co are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, AFW sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with DONGKUK STEEL and AFW

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

The idea behind DONGKUK STEEL MILL and AFW 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.