Correlation Between Dongkuk Steel and Keum Kang
Can any of the company-specific risk be diversified away by investing in both Dongkuk Steel and Keum Kang 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 Keum Kang 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 Keum Kang Steel, you can compare the effects of market volatilities on Dongkuk Steel and Keum Kang 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 Keum Kang. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dongkuk Steel and Keum Kang.
Diversification Opportunities for Dongkuk Steel and Keum Kang
0.84 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Dongkuk and Keum is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding Dongkuk Steel Mill and Keum Kang Steel in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Keum Kang Steel 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 Keum Kang. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Keum Kang Steel has no effect on the direction of Dongkuk Steel i.e., Dongkuk Steel and Keum Kang go up and down completely randomly.
Pair Corralation between Dongkuk Steel and Keum Kang
Assuming the 90 days trading horizon Dongkuk Steel Mill is expected to generate 0.31 times more return on investment than Keum Kang. However, Dongkuk Steel Mill is 3.22 times less risky than Keum Kang. It trades about -0.28 of its potential returns per unit of risk. Keum Kang Steel is currently generating about -0.12 per unit of risk. If you would invest 797,000 in Dongkuk Steel Mill on August 28, 2024 and sell it today you would lose (48,000) from holding Dongkuk Steel Mill or give up 6.02% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Dongkuk Steel Mill vs. Keum Kang Steel
Performance |
| Timeline |
| Dongkuk Steel Mill |
| Keum Kang Steel |
Dongkuk Steel and Keum Kang Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Dongkuk Steel and Keum Kang
The main advantage of trading using opposite Dongkuk Steel and Keum Kang positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dongkuk Steel position performs unexpectedly, Keum Kang 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 Keum Kang will offset losses from the drop in Keum Kang's long position.| Dongkuk Steel vs. iNtRON Biotechnology | Dongkuk Steel vs. Korean Drug Co | Dongkuk Steel vs. Vitzro Tech Co | Dongkuk Steel vs. CU Tech Corp |
| Keum Kang vs. LG Chemicals | Keum Kang vs. Lotte Chemical Corp | Keum Kang vs. Hyundai Steel | Keum Kang vs. Seah Steel Corp |
Check out your portfolio center.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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.
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