Correlation Between Kukdong Oil and Daechang Steel
Can any of the company-specific risk be diversified away by investing in both Kukdong Oil and Daechang 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 Kukdong Oil and Daechang Steel into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Kukdong Oil Chemicals and Daechang Steel Co, you can compare the effects of market volatilities on Kukdong Oil and Daechang 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 Kukdong Oil with a short position of Daechang Steel. Check out your portfolio center. Please also check ongoing floating volatility patterns of Kukdong Oil and Daechang Steel.
Diversification Opportunities for Kukdong Oil and Daechang Steel
0.7 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Kukdong and Daechang is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding Kukdong Oil Chemicals and Daechang Steel Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Daechang Steel and Kukdong Oil 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 Kukdong Oil Chemicals are associated (or correlated) with Daechang Steel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Daechang Steel has no effect on the direction of Kukdong Oil i.e., Kukdong Oil and Daechang Steel go up and down completely randomly.
Pair Corralation between Kukdong Oil and Daechang Steel
Assuming the 90 days trading horizon Kukdong Oil Chemicals is expected to generate 1.8 times more return on investment than Daechang Steel. However, Kukdong Oil is 1.8 times more volatile than Daechang Steel Co. It trades about 0.02 of its potential returns per unit of risk. Daechang Steel Co is currently generating about -0.02 per unit of risk. If you would invest 337,442 in Kukdong Oil Chemicals on November 27, 2024 and sell it today you would earn a total of 11,558 from holding Kukdong Oil Chemicals or generate 3.43% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Kukdong Oil Chemicals vs. Daechang Steel Co
Performance |
| Timeline |
| Kukdong Oil Chemicals |
| Daechang Steel |
Kukdong Oil and Daechang Steel Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Kukdong Oil and Daechang Steel
The main advantage of trading using opposite Kukdong Oil and Daechang Steel positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Kukdong Oil position performs unexpectedly, Daechang 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 Daechang Steel will offset losses from the drop in Daechang Steel's long position.| Kukdong Oil vs. Sangsangin Investment Securities | Kukdong Oil vs. Ssangyong Materials Corp | Kukdong Oil vs. Golden Bridge Investment | Kukdong Oil vs. EBEST Investment Securities |
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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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.
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