Correlation Between Dongbu Steel and Wonil Special
Can any of the company-specific risk be diversified away by investing in both Dongbu Steel and Wonil Special 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 Wonil Special 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 Wonil Special Steel, you can compare the effects of market volatilities on Dongbu Steel and Wonil Special 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 Wonil Special. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dongbu Steel and Wonil Special.
Diversification Opportunities for Dongbu Steel and Wonil Special
0.09 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Dongbu and Wonil is 0.09. Overlapping area represents the amount of risk that can be diversified away by holding Dongbu Steel Co and Wonil Special Steel in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Wonil Special Steel 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 Wonil Special. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Wonil Special Steel has no effect on the direction of Dongbu Steel i.e., Dongbu Steel and Wonil Special go up and down completely randomly.
Pair Corralation between Dongbu Steel and Wonil Special
Assuming the 90 days trading horizon Dongbu Steel Co is expected to generate 1.47 times more return on investment than Wonil Special. However, Dongbu Steel is 1.47 times more volatile than Wonil Special Steel. It trades about -0.04 of its potential returns per unit of risk. Wonil Special Steel is currently generating about -0.07 per unit of risk. If you would invest 811,000 in Dongbu Steel Co on September 3, 2024 and sell it today you would lose (149,000) from holding Dongbu Steel Co or give up 18.37% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Dongbu Steel Co vs. Wonil Special Steel
Performance |
| Timeline |
| Dongbu Steel |
| Wonil Special Steel |
Dongbu Steel and Wonil Special Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Dongbu Steel and Wonil Special
The main advantage of trading using opposite Dongbu Steel and Wonil Special positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dongbu Steel position performs unexpectedly, Wonil Special 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 Wonil Special will offset losses from the drop in Wonil Special's long position.| Dongbu Steel vs. LG Chemicals | Dongbu Steel vs. POSCO Holdings | Dongbu Steel vs. Hanwha Solutions | Dongbu Steel vs. Lotte Chemical Corp |
| Wonil Special vs. Samwha Electronics Co | Wonil Special vs. KyungIn Electronics Co | Wonil Special vs. Daou Technology | Wonil Special vs. Cuckoo Electronics 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 Global Correlations module to find global opportunities by holding instruments from different markets.
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