Correlation Between Korea Electric and Dong A
Can any of the company-specific risk be diversified away by investing in both Korea Electric 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 Korea Electric and Dong A into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Korea Electric Power and Dong A Steel Technology, you can compare the effects of market volatilities on Korea Electric 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 Korea Electric with a short position of Dong A. Check out your portfolio center. Please also check ongoing floating volatility patterns of Korea Electric and Dong A.
Diversification Opportunities for Korea Electric and Dong A
0.69 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Korea and Dong is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding Korea Electric Power 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 Korea Electric 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 Electric Power 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 Korea Electric i.e., Korea Electric and Dong A go up and down completely randomly.
Pair Corralation between Korea Electric and Dong A
Assuming the 90 days trading horizon Korea Electric is expected to generate 4.17 times less return on investment than Dong A. But when comparing it to its historical volatility, Korea Electric Power is 1.14 times less risky than Dong A. It trades about 0.1 of its potential returns per unit of risk. Dong A Steel Technology is currently generating about 0.35 of returns per unit of risk over similar time horizon. If you would invest 283,274 in Dong A Steel Technology on October 23, 2024 and sell it today you would earn a total of 31,226 from holding Dong A Steel Technology or generate 11.02% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Korea Electric Power vs. Dong A Steel Technology
Performance |
| Timeline |
| Korea Electric Power |
| Dong A Steel |
Korea Electric and Dong A Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Korea Electric and Dong A
The main advantage of trading using opposite Korea Electric and Dong A positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Korea Electric 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.| Korea Electric vs. Sungdo Engineering Construction | Korea Electric vs. KCC Engineering Construction | Korea Electric vs. Sewoon Medical Co | Korea Electric vs. SEOJEON ELECTRIC MACHINERY |
| Dong A vs. Ssangyong Information Communication | Dong A vs. Iljin Display | Dong A vs. ABCO Electronics Co | Dong A vs. Nable Communications |
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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.
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