Correlation Between Dongbu Steel and Youngchang Chemical
Can any of the company-specific risk be diversified away by investing in both Dongbu Steel and Youngchang Chemical 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 Youngchang Chemical 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 Youngchang Chemical Co, you can compare the effects of market volatilities on Dongbu Steel and Youngchang Chemical 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 Youngchang Chemical. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dongbu Steel and Youngchang Chemical.
Diversification Opportunities for Dongbu Steel and Youngchang Chemical
0.38 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Dongbu and Youngchang is 0.38. Overlapping area represents the amount of risk that can be diversified away by holding Dongbu Steel Co and Youngchang Chemical Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Youngchang Chemical 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 Youngchang Chemical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Youngchang Chemical has no effect on the direction of Dongbu Steel i.e., Dongbu Steel and Youngchang Chemical go up and down completely randomly.
Pair Corralation between Dongbu Steel and Youngchang Chemical
Assuming the 90 days trading horizon Dongbu Steel Co is expected to generate 0.7 times more return on investment than Youngchang Chemical. However, Dongbu Steel Co is 1.42 times less risky than Youngchang Chemical. It trades about -0.05 of its potential returns per unit of risk. Youngchang Chemical Co is currently generating about -0.29 per unit of risk. If you would invest 683,000 in Dongbu Steel Co on September 1, 2024 and sell it today you would lose (21,000) from holding Dongbu Steel Co or give up 3.07% 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. Youngchang Chemical Co
Performance |
| Timeline |
| Dongbu Steel |
| Youngchang Chemical |
Dongbu Steel and Youngchang Chemical Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Dongbu Steel and Youngchang Chemical
The main advantage of trading using opposite Dongbu Steel and Youngchang Chemical positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dongbu Steel position performs unexpectedly, Youngchang Chemical 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 Youngchang Chemical will offset losses from the drop in Youngchang Chemical's long position.| Dongbu Steel vs. LG Chemicals | Dongbu Steel vs. POSCO Holdings | Dongbu Steel vs. Hanwha Solutions | Dongbu Steel vs. Lotte Chemical Corp |
| Youngchang Chemical vs. LG Chem | Youngchang Chemical vs. Chunbo Co | Youngchang Chemical vs. Hyosung Chemical Corp | Youngchang Chemical vs. LIG ES SPAC |
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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.
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