Correlation Between Dongbu Steel and Daedong Steel
Can any of the company-specific risk be diversified away by investing in both Dongbu Steel and Daedong 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 Daedong 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 Daedong Steel Co, you can compare the effects of market volatilities on Dongbu Steel and Daedong 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 Daedong Steel. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dongbu Steel and Daedong Steel.
Diversification Opportunities for Dongbu Steel and Daedong Steel
0.53 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Dongbu and Daedong is 0.53. Overlapping area represents the amount of risk that can be diversified away by holding Dongbu Steel Co and Daedong Steel Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Daedong 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 Daedong Steel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Daedong Steel has no effect on the direction of Dongbu Steel i.e., Dongbu Steel and Daedong Steel go up and down completely randomly.
Pair Corralation between Dongbu Steel and Daedong Steel
Assuming the 90 days trading horizon Dongbu Steel Co is expected to under-perform the Daedong Steel. But the stock apears to be less risky and, when comparing its historical volatility, Dongbu Steel Co is 1.94 times less risky than Daedong Steel. The stock trades about -0.05 of its potential returns per unit of risk. The Daedong Steel Co is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest 355,097 in Daedong Steel Co on September 14, 2024 and sell it today you would lose (23,097) from holding Daedong Steel Co or give up 6.5% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Dongbu Steel Co vs. Daedong Steel Co
Performance |
| Timeline |
| Dongbu Steel |
| Daedong Steel |
Dongbu Steel and Daedong Steel Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Dongbu Steel and Daedong Steel
The main advantage of trading using opposite Dongbu Steel and Daedong Steel positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dongbu Steel position performs unexpectedly, Daedong 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 Daedong Steel will offset losses from the drop in Daedong Steel's long position.| Dongbu Steel vs. LG Chemicals | Dongbu Steel vs. POSCO Holdings | Dongbu Steel vs. Hanwha Solutions | Dongbu Steel vs. Lotte Chemical Corp |
| Daedong Steel vs. Keum Kang Steel | Daedong Steel vs. Samhyun Steel Co | Daedong Steel vs. Gyeongnam Steel Co | Daedong Steel vs. Jeil Steel Mfg |
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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.
Other Complementary Tools
| Bollinger Bands Use Bollinger Bands indicator to analyze target price for a given investing horizon | |
| Idea Analyzer Analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas | |
| Portfolio Backtesting Avoid under-diversification and over-optimization by backtesting your portfolios | |
| Equity Search Search for actively traded equities including funds and ETFs from over 30 global markets | |
| Portfolio Analyzer Portfolio analysis module that provides access to portfolio diagnostics and optimization engine |