Correlation Between Dongwon Metal and Daiyang Metal
Can any of the company-specific risk be diversified away by investing in both Dongwon Metal and Daiyang Metal 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 Dongwon Metal and Daiyang Metal into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Dongwon Metal Co and Daiyang Metal Co, you can compare the effects of market volatilities on Dongwon Metal and Daiyang Metal 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 Dongwon Metal with a short position of Daiyang Metal. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dongwon Metal and Daiyang Metal.
Diversification Opportunities for Dongwon Metal and Daiyang Metal
0.88 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Dongwon and Daiyang is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding Dongwon Metal Co and Daiyang Metal Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Daiyang Metal and Dongwon Metal 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 Dongwon Metal Co are associated (or correlated) with Daiyang Metal. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Daiyang Metal has no effect on the direction of Dongwon Metal i.e., Dongwon Metal and Daiyang Metal go up and down completely randomly.
Pair Corralation between Dongwon Metal and Daiyang Metal
Assuming the 90 days trading horizon Dongwon Metal Co is expected to generate 0.71 times more return on investment than Daiyang Metal. However, Dongwon Metal Co is 1.4 times less risky than Daiyang Metal. It trades about -0.15 of its potential returns per unit of risk. Daiyang Metal Co is currently generating about -0.2 per unit of risk. If you would invest 122,700 in Dongwon Metal Co on August 29, 2024 and sell it today you would lose (9,200) from holding Dongwon Metal Co or give up 7.5% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Dongwon Metal Co vs. Daiyang Metal Co
Performance |
| Timeline |
| Dongwon Metal |
| Daiyang Metal |
Dongwon Metal and Daiyang Metal Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Dongwon Metal and Daiyang Metal
The main advantage of trading using opposite Dongwon Metal and Daiyang Metal positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dongwon Metal position performs unexpectedly, Daiyang Metal 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 Daiyang Metal will offset losses from the drop in Daiyang Metal's long position.| Dongwon Metal vs. Automobile Pc | Dongwon Metal vs. KB Financial Group | Dongwon Metal vs. Koryo Credit Information | Dongwon Metal vs. Samsung Life Insurance |
| Daiyang Metal vs. SCI Information Service | Daiyang Metal vs. Hyosung Advanced Materials | Daiyang Metal vs. LS Materials | Daiyang Metal vs. System and Application |
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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.
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