Correlation Between Dong Il and Han Kook
Can any of the company-specific risk be diversified away by investing in both Dong Il and Han Kook 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 Dong Il and Han Kook into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Dong Il Steel and Han Kook Steel, you can compare the effects of market volatilities on Dong Il and Han Kook 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 Dong Il with a short position of Han Kook. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dong Il and Han Kook.
Diversification Opportunities for Dong Il and Han Kook
Very weak diversification
The 3 months correlation between Dong and Han is 0.59. Overlapping area represents the amount of risk that can be diversified away by holding Dong Il Steel and Han Kook Steel in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Han Kook Steel and Dong Il 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 Dong Il Steel are associated (or correlated) with Han Kook. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Han Kook Steel has no effect on the direction of Dong Il i.e., Dong Il and Han Kook go up and down completely randomly.
Pair Corralation between Dong Il and Han Kook
Assuming the 90 days trading horizon Dong Il Steel is expected to under-perform the Han Kook. But the stock apears to be less risky and, when comparing its historical volatility, Dong Il Steel is 1.73 times less risky than Han Kook. The stock trades about -0.06 of its potential returns per unit of risk. The Han Kook Steel is currently generating about -0.01 of returns per unit of risk over similar time horizon. If you would invest 282,500 in Han Kook Steel on August 28, 2024 and sell it today you would lose (88,000) from holding Han Kook Steel or give up 31.15% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Dong Il Steel vs. Han Kook Steel
Performance |
| Timeline |
| Dong Il Steel |
| Han Kook Steel |
Dong Il and Han Kook Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Dong Il and Han Kook
The main advantage of trading using opposite Dong Il and Han Kook positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dong Il position performs unexpectedly, Han Kook 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 Han Kook will offset losses from the drop in Han Kook's long position.| Dong Il vs. Shinsegae Information Communication | Dong Il vs. Daejoo Electronic Materials | Dong Il vs. SCI Information Service | Dong Il vs. Samji Electronics Co |
| Han Kook vs. Fine Besteel Co | Han Kook vs. Seoyon Topmetal Co | Han Kook vs. Daiyang Metal Co | Han Kook vs. Pureun Mutual Savings |
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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.
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