Correlation Between Posco Chemical and Dong A
Can any of the company-specific risk be diversified away by investing in both Posco Chemical and Dong A 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 Posco Chemical and Dong A into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Posco Chemical Co and Dong A Steel Technology, you can compare the effects of market volatilities on Posco Chemical and Dong A 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 Posco Chemical with a short position of Dong A. Check out your portfolio center. Please also check ongoing floating volatility patterns of Posco Chemical and Dong A.
Diversification Opportunities for Posco Chemical and Dong A
-0.7 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Posco and Dong is -0.7. Overlapping area represents the amount of risk that can be diversified away by holding Posco Chemical Co and Dong A Steel Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dong A Steel and Posco Chemical 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 Posco Chemical Co are associated (or correlated) with Dong A. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dong A Steel has no effect on the direction of Posco Chemical i.e., Posco Chemical and Dong A go up and down completely randomly.
Pair Corralation between Posco Chemical and Dong A
Assuming the 90 days trading horizon Posco Chemical Co is expected to under-perform the Dong A. In addition to that, Posco Chemical is 1.44 times more volatile than Dong A Steel Technology. It trades about -0.03 of its total potential returns per unit of risk. Dong A Steel Technology is currently generating about -0.02 per unit of volatility. If you would invest 430,500 in Dong A Steel Technology on September 4, 2024 and sell it today you would lose (100,500) from holding Dong A Steel Technology or give up 23.34% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Posco Chemical Co vs. Dong A Steel Technology
Performance |
| Timeline |
| Posco Chemical |
| Dong A Steel |
Posco Chemical and Dong A Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Posco Chemical and Dong A
The main advantage of trading using opposite Posco Chemical and Dong A positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Posco Chemical position performs unexpectedly, Dong A 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 Dong A will offset losses from the drop in Dong A's long position.| Posco Chemical vs. Hanilcmt Co | Posco Chemical vs. LG Uplus | Posco Chemical vs. ASTORY CoLtd | Posco Chemical vs. AnterogenCoLtd |
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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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.
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