Correlation Between Dongbu Insurance and Seah Steel

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Can any of the company-specific risk be diversified away by investing in both Dongbu Insurance and Seah Steel 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 Dongbu Insurance and Seah Steel into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Dongbu Insurance Co and Seah Steel Corp, you can compare the effects of market volatilities on Dongbu Insurance and Seah Steel 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 Dongbu Insurance with a short position of Seah Steel. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dongbu Insurance and Seah Steel.

Diversification Opportunities for Dongbu Insurance and Seah Steel

DongbuSeahDiversified AwayDongbuSeahDiversified Away100%
-0.58
  Correlation Coefficient

Excellent diversification

The 3 months correlation between Dongbu and Seah is -0.58. Overlapping area represents the amount of risk that can be diversified away by holding Dongbu Insurance Co and Seah Steel Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Seah Steel Corp and Dongbu Insurance 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 Dongbu Insurance Co are associated (or correlated) with Seah Steel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Seah Steel Corp has no effect on the direction of Dongbu Insurance i.e., Dongbu Insurance and Seah Steel go up and down completely randomly.

Pair Corralation between Dongbu Insurance and Seah Steel

Assuming the 90 days trading horizon Dongbu Insurance Co is expected to generate 1.26 times more return on investment than Seah Steel. However, Dongbu Insurance is 1.26 times more volatile than Seah Steel Corp. It trades about 0.04 of its potential returns per unit of risk. Seah Steel Corp is currently generating about 0.01 per unit of risk. If you would invest  7,201,188  in Dongbu Insurance Co on November 22, 2024 and sell it today you would earn a total of  2,888,812  from holding Dongbu Insurance Co or generate 40.12% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthVery Weak
Accuracy100.0%
ValuesDaily Returns

Dongbu Insurance Co  vs.  Seah Steel Corp

 Performance 
JavaScript chart by amCharts 3.21.15Dec2025Feb -1001020
JavaScript chart by amCharts 3.21.15005830 306200
       Timeline  
Dongbu Insurance 

Risk-Adjusted Performance

Very Weak

 
Weak
 
Strong
Over the last 90 days Dongbu Insurance Co has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Dongbu Insurance is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.
JavaScript chart by amCharts 3.21.15DecJanFebJanFeb90,00095,000100,000105,000110,000
Seah Steel Corp 

Risk-Adjusted Performance

Good

 
Weak
 
Strong
Compared to the overall equity markets, risk-adjusted returns on investments in Seah Steel Corp are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Seah Steel sustained solid returns over the last few months and may actually be approaching a breakup point.
JavaScript chart by amCharts 3.21.15DecJanFebJanFeb110,000115,000120,000125,000130,000135,000140,000145,000150,000

Dongbu Insurance and Seah Steel Volatility Contrast

   Predicted Return Density   
JavaScript chart by amCharts 3.21.15-4.2-3.15-2.09-1.040.01.022.053.074.09 0.0450.0500.0550.060
JavaScript chart by amCharts 3.21.15005830 306200
       Returns  

Pair Trading with Dongbu Insurance and Seah Steel

The main advantage of trading using opposite Dongbu Insurance and Seah Steel positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dongbu Insurance position performs unexpectedly, Seah Steel 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 Seah Steel will offset losses from the drop in Seah Steel's long position.
The idea behind Dongbu Insurance Co and Seah Steel Corp pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.

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