Correlation Between Dongkuk Steel and Miwon Chemicals
Can any of the company-specific risk be diversified away by investing in both Dongkuk Steel and Miwon Chemicals 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 Miwon Chemicals 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 Miwon Chemicals Co, you can compare the effects of market volatilities on Dongkuk Steel and Miwon Chemicals 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 Miwon Chemicals. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dongkuk Steel and Miwon Chemicals.
Diversification Opportunities for Dongkuk Steel and Miwon Chemicals
0.71 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Dongkuk and Miwon is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding Dongkuk Steel Mill and Miwon Chemicals Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Miwon Chemicals 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 Miwon Chemicals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Miwon Chemicals has no effect on the direction of Dongkuk Steel i.e., Dongkuk Steel and Miwon Chemicals go up and down completely randomly.
Pair Corralation between Dongkuk Steel and Miwon Chemicals
Assuming the 90 days trading horizon Dongkuk Steel Mill is expected to under-perform the Miwon Chemicals. In addition to that, Dongkuk Steel is 1.19 times more volatile than Miwon Chemicals Co. It trades about -0.07 of its total potential returns per unit of risk. Miwon Chemicals Co is currently generating about 0.01 per unit of volatility. If you would invest 7,930,000 in Miwon Chemicals Co on September 13, 2024 and sell it today you would earn a total of 0.00 from holding Miwon Chemicals Co or generate 0.0% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Dongkuk Steel Mill vs. Miwon Chemicals Co
Performance |
| Timeline |
| Dongkuk Steel Mill |
| Miwon Chemicals |
Dongkuk Steel and Miwon Chemicals Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Dongkuk Steel and Miwon Chemicals
The main advantage of trading using opposite Dongkuk Steel and Miwon Chemicals positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dongkuk Steel position performs unexpectedly, Miwon Chemicals 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 Miwon Chemicals will offset losses from the drop in Miwon Chemicals' long position.| Dongkuk Steel vs. LG Chemicals | Dongkuk Steel vs. POSCO Holdings | Dongkuk Steel vs. Hanwha Solutions | Dongkuk Steel vs. Lotte Chemical Corp |
| Miwon Chemicals vs. Samsung Electronics Co | Miwon Chemicals vs. Samsung Electronics Co | Miwon Chemicals vs. SK Hynix | Miwon Chemicals vs. POSCO Holdings |
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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.
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