Correlation Between Korea Steel and Digital Power
Can any of the company-specific risk be diversified away by investing in both Korea Steel and Digital Power 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 Korea Steel and Digital Power into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Korea Steel Co and Digital Power Communications, you can compare the effects of market volatilities on Korea Steel and Digital Power 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 Korea Steel with a short position of Digital Power. Check out your portfolio center. Please also check ongoing floating volatility patterns of Korea Steel and Digital Power.
Diversification Opportunities for Korea Steel and Digital Power
0.3 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Korea and Digital is 0.3. Overlapping area represents the amount of risk that can be diversified away by holding Korea Steel Co and Digital Power Communications in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Digital Power Commun and Korea 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 Korea Steel Co are associated (or correlated) with Digital Power. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Digital Power Commun has no effect on the direction of Korea Steel i.e., Korea Steel and Digital Power go up and down completely randomly.
Pair Corralation between Korea Steel and Digital Power
Assuming the 90 days trading horizon Korea Steel Co is expected to generate 0.64 times more return on investment than Digital Power. However, Korea Steel Co is 1.56 times less risky than Digital Power. It trades about -0.19 of its potential returns per unit of risk. Digital Power Communications is currently generating about -0.19 per unit of risk. If you would invest 168,900 in Korea Steel Co on November 5, 2024 and sell it today you would lose (4,400) from holding Korea Steel Co or give up 2.61% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Korea Steel Co vs. Digital Power Communications
Performance |
| Timeline |
| Korea Steel |
| Digital Power Commun |
Korea Steel and Digital Power Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Korea Steel and Digital Power
The main advantage of trading using opposite Korea Steel and Digital Power positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Korea Steel position performs unexpectedly, Digital Power 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 Digital Power will offset losses from the drop in Digital Power's long position.| Korea Steel vs. Kaonmedia Co | Korea Steel vs. Pyung Hwa Industrial | Korea Steel vs. Eagon Industrial Co | Korea Steel vs. JYP Entertainment Corp |
| Digital Power vs. SCI Information Service | Digital Power vs. Korea Information Engineering | Digital Power vs. HB Technology TD | Digital Power vs. Sewoon Medical Co |
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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.
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