Correlation Between Dongbu Steel and BooKook Steel
Can any of the company-specific risk be diversified away by investing in both Dongbu Steel and BooKook 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 Dongbu Steel and BooKook Steel 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 BooKook Steel Co, you can compare the effects of market volatilities on Dongbu Steel and BooKook 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 Dongbu Steel with a short position of BooKook Steel. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dongbu Steel and BooKook Steel.
Diversification Opportunities for Dongbu Steel and BooKook Steel
0.22 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Dongbu and BooKook is 0.22. Overlapping area represents the amount of risk that can be diversified away by holding Dongbu Steel Co and BooKook Steel Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BooKook 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 BooKook Steel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BooKook Steel has no effect on the direction of Dongbu Steel i.e., Dongbu Steel and BooKook Steel go up and down completely randomly.
Pair Corralation between Dongbu Steel and BooKook Steel
Assuming the 90 days trading horizon Dongbu Steel Co is expected to generate 1.33 times more return on investment than BooKook Steel. However, Dongbu Steel is 1.33 times more volatile than BooKook Steel Co. It trades about -0.03 of its potential returns per unit of risk. BooKook Steel Co is currently generating about -0.09 per unit of risk. If you would invest 676,000 in Dongbu Steel Co on September 2, 2024 and sell it today you would lose (14,000) from holding Dongbu Steel Co or give up 2.07% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Dongbu Steel Co vs. BooKook Steel Co
Performance |
| Timeline |
| Dongbu Steel |
| BooKook Steel |
Dongbu Steel and BooKook Steel Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Dongbu Steel and BooKook Steel
The main advantage of trading using opposite Dongbu Steel and BooKook Steel positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dongbu Steel position performs unexpectedly, BooKook 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 BooKook Steel will offset losses from the drop in BooKook Steel's long position.| Dongbu Steel vs. LG Chemicals | Dongbu Steel vs. POSCO Holdings | Dongbu Steel vs. Hanwha Solutions | Dongbu Steel vs. Hyundai Steel |
| BooKook Steel vs. AptaBio Therapeutics | BooKook Steel vs. Daewoo SBI SPAC | BooKook Steel vs. Dream Security co | BooKook Steel vs. Microfriend |
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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