Correlation Between Dongkuk Steel and Histeel
Can any of the company-specific risk be diversified away by investing in both Dongkuk Steel and Histeel 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 Histeel 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 Histeel, you can compare the effects of market volatilities on Dongkuk Steel and Histeel 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 Histeel. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dongkuk Steel and Histeel.
Diversification Opportunities for Dongkuk Steel and Histeel
0.74 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Dongkuk and Histeel is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding Dongkuk Steel Mill and Histeel in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Histeel 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 Histeel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Histeel has no effect on the direction of Dongkuk Steel i.e., Dongkuk Steel and Histeel go up and down completely randomly.
Pair Corralation between Dongkuk Steel and Histeel
Assuming the 90 days trading horizon Dongkuk Steel Mill is expected to under-perform the Histeel. But the stock apears to be less risky and, when comparing its historical volatility, Dongkuk Steel Mill is 4.07 times less risky than Histeel. The stock trades about -0.28 of its potential returns per unit of risk. The Histeel is currently generating about -0.01 of returns per unit of risk over similar time horizon. If you would invest 312,500 in Histeel on September 1, 2024 and sell it today you would lose (7,500) from holding Histeel or give up 2.4% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Dongkuk Steel Mill vs. Histeel
Performance |
| Timeline |
| Dongkuk Steel Mill |
| Histeel |
Dongkuk Steel and Histeel Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Dongkuk Steel and Histeel
The main advantage of trading using opposite Dongkuk Steel and Histeel positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dongkuk Steel position performs unexpectedly, Histeel 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 Histeel will offset losses from the drop in Histeel's long position.| Dongkuk Steel vs. LG Chemicals | Dongkuk Steel vs. POSCO Holdings | Dongkuk Steel vs. Hanwha Solutions | Dongkuk Steel vs. Hyundai Steel |
| Histeel vs. LG Chemicals | Histeel vs. POSCO Holdings | Histeel vs. Hanwha Solutions | Histeel vs. Hyundai Steel |
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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.
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