Correlation Between Dongbang Transport and Dongnam Chemical
Can any of the company-specific risk be diversified away by investing in both Dongbang Transport and Dongnam Chemical 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 Dongbang Transport and Dongnam Chemical into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Dongbang Transport Logistics and Dongnam Chemical Co, you can compare the effects of market volatilities on Dongbang Transport and Dongnam Chemical 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 Dongbang Transport with a short position of Dongnam Chemical. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dongbang Transport and Dongnam Chemical.
Diversification Opportunities for Dongbang Transport and Dongnam Chemical
0.27 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Dongbang and Dongnam is 0.27. Overlapping area represents the amount of risk that can be diversified away by holding Dongbang Transport Logistics and Dongnam Chemical Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dongnam Chemical and Dongbang Transport 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 Dongbang Transport Logistics are associated (or correlated) with Dongnam Chemical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dongnam Chemical has no effect on the direction of Dongbang Transport i.e., Dongbang Transport and Dongnam Chemical go up and down completely randomly.
Pair Corralation between Dongbang Transport and Dongnam Chemical
Assuming the 90 days trading horizon Dongbang Transport Logistics is expected to under-perform the Dongnam Chemical. In addition to that, Dongbang Transport is 3.81 times more volatile than Dongnam Chemical Co. It trades about -0.17 of its total potential returns per unit of risk. Dongnam Chemical Co is currently generating about 0.24 per unit of volatility. If you would invest 3,355,000 in Dongnam Chemical Co on November 5, 2024 and sell it today you would earn a total of 50,000 from holding Dongnam Chemical Co or generate 1.49% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Dongbang Transport Logistics vs. Dongnam Chemical Co
Performance |
| Timeline |
| Dongbang Transport |
| Dongnam Chemical |
Dongbang Transport and Dongnam Chemical Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Dongbang Transport and Dongnam Chemical
The main advantage of trading using opposite Dongbang Transport and Dongnam Chemical positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dongbang Transport position performs unexpectedly, Dongnam Chemical 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 Dongnam Chemical will offset losses from the drop in Dongnam Chemical's long position.| Dongbang Transport vs. Seoul Electronics Telecom | Dongbang Transport vs. Samlip General Foods | Dongbang Transport vs. SK Telecom Co | Dongbang Transport vs. Jin Air Co |
| Dongnam Chemical vs. Jeong Moon Information | Dongnam Chemical vs. Korea Information Engineering | Dongnam Chemical vs. Korea Alcohol Industrial | Dongnam Chemical vs. DSC Investment |
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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.
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