Correlation Between Dongbu Steel and KTB Investment
Can any of the company-specific risk be diversified away by investing in both Dongbu Steel and KTB Investment 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 KTB Investment 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 KTB Investment Securities, you can compare the effects of market volatilities on Dongbu Steel and KTB Investment 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 KTB Investment. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dongbu Steel and KTB Investment.
Diversification Opportunities for Dongbu Steel and KTB Investment
0.06 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Dongbu and KTB is 0.06. Overlapping area represents the amount of risk that can be diversified away by holding Dongbu Steel Co and KTB Investment Securities in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on KTB Investment Securities 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 KTB Investment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of KTB Investment Securities has no effect on the direction of Dongbu Steel i.e., Dongbu Steel and KTB Investment go up and down completely randomly.
Pair Corralation between Dongbu Steel and KTB Investment
Assuming the 90 days trading horizon Dongbu Steel Co is expected to generate 1.29 times more return on investment than KTB Investment. However, Dongbu Steel is 1.29 times more volatile than KTB Investment Securities. It trades about -0.02 of its potential returns per unit of risk. KTB Investment Securities is currently generating about -0.03 per unit of risk. If you would invest 814,406 in Dongbu Steel Co on September 12, 2024 and sell it today you would lose (222,406) from holding Dongbu Steel Co or give up 27.31% 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. KTB Investment Securities
Performance |
| Timeline |
| Dongbu Steel |
| KTB Investment Securities |
Dongbu Steel and KTB Investment Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Dongbu Steel and KTB Investment
The main advantage of trading using opposite Dongbu Steel and KTB Investment positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dongbu Steel position performs unexpectedly, KTB Investment 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 KTB Investment will offset losses from the drop in KTB Investment's long position.| Dongbu Steel vs. LG Chemicals | Dongbu Steel vs. POSCO Holdings | Dongbu Steel vs. Hanwha Solutions | Dongbu Steel vs. Lotte Chemical Corp |
| KTB Investment vs. Samsung Electronics Co | KTB Investment vs. Samsung Electronics Co | KTB Investment vs. SK Hynix | KTB Investment vs. POSCO Holdings |
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 Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.
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