Correlation Between Dongbu Steel and FnGuide
Can any of the company-specific risk be diversified away by investing in both Dongbu Steel and FnGuide 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 FnGuide 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 FnGuide, you can compare the effects of market volatilities on Dongbu Steel and FnGuide 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 FnGuide. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dongbu Steel and FnGuide.
Diversification Opportunities for Dongbu Steel and FnGuide
0.23 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Dongbu and FnGuide is 0.23. Overlapping area represents the amount of risk that can be diversified away by holding Dongbu Steel Co and FnGuide in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FnGuide 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 FnGuide. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of FnGuide has no effect on the direction of Dongbu Steel i.e., Dongbu Steel and FnGuide go up and down completely randomly.
Pair Corralation between Dongbu Steel and FnGuide
Assuming the 90 days trading horizon Dongbu Steel Co is expected to generate 0.2 times more return on investment than FnGuide. However, Dongbu Steel Co is 5.06 times less risky than FnGuide. It trades about 0.13 of its potential returns per unit of risk. FnGuide is currently generating about 0.02 per unit of risk. If you would invest 568,000 in Dongbu Steel Co on August 29, 2024 and sell it today you would earn a total of 91,000 from holding Dongbu Steel Co or generate 16.02% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 98.31% |
| Values | Daily Returns |
Dongbu Steel Co vs. FnGuide
Performance |
| Timeline |
| Dongbu Steel |
| FnGuide |
Dongbu Steel and FnGuide Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Dongbu Steel and FnGuide
The main advantage of trading using opposite Dongbu Steel and FnGuide positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dongbu Steel position performs unexpectedly, FnGuide 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 FnGuide will offset losses from the drop in FnGuide's long position.| Dongbu Steel vs. LG Chemicals | Dongbu Steel vs. POSCO Holdings | Dongbu Steel vs. Hanwha Solutions | Dongbu Steel vs. Lotte Chemical Corp |
| FnGuide vs. InnoTherapy | FnGuide vs. Taeyang Metal Industrial | FnGuide vs. Daiyang Metal Co | FnGuide vs. Hyunwoo Industrial 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.
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