Correlation Between Dongbu Steel and Korea Zinc
Can any of the company-specific risk be diversified away by investing in both Dongbu Steel and Korea Zinc 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 Steel and Korea Zinc into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Dongbu Steel Co and Korea Zinc, you can compare the effects of market volatilities on Dongbu Steel and Korea Zinc 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 Steel with a short position of Korea Zinc. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dongbu Steel and Korea Zinc.
Diversification Opportunities for Dongbu Steel and Korea Zinc
0.68 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Dongbu and Korea is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding Dongbu Steel Co and Korea Zinc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Korea Zinc and Dongbu 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 Dongbu Steel Co are associated (or correlated) with Korea Zinc. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Korea Zinc has no effect on the direction of Dongbu Steel i.e., Dongbu Steel and Korea Zinc go up and down completely randomly.
Pair Corralation between Dongbu Steel and Korea Zinc
Assuming the 90 days trading horizon Dongbu Steel Co is expected to under-perform the Korea Zinc. But the stock apears to be less risky and, when comparing its historical volatility, Dongbu Steel Co is 1.5 times less risky than Korea Zinc. The stock trades about 0.0 of its potential returns per unit of risk. The Korea Zinc is currently generating about 0.21 of returns per unit of risk over similar time horizon. If you would invest 47,968,600 in Korea Zinc on September 3, 2024 and sell it today you would earn a total of 52,031,400 from holding Korea Zinc or generate 108.47% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Dongbu Steel Co vs. Korea Zinc
Performance |
| Timeline |
| Dongbu Steel |
| Korea Zinc |
Dongbu Steel and Korea Zinc Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Dongbu Steel and Korea Zinc
The main advantage of trading using opposite Dongbu Steel and Korea Zinc positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dongbu Steel position performs unexpectedly, Korea Zinc 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 Korea Zinc will offset losses from the drop in Korea Zinc's long position.| Dongbu Steel vs. LG Chemicals | Dongbu Steel vs. POSCO Holdings | Dongbu Steel vs. Hanwha Solutions | Dongbu Steel vs. Lotte Chemical Corp |
| Korea Zinc vs. Dongbu Steel Co | Korea Zinc vs. Heungkuk Metaltech CoLtd | Korea Zinc vs. Fine Besteel Co | Korea Zinc vs. Dong A Steel Technology |
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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.
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