Correlation Between Dongwon Metal and Kumho Petro
Can any of the company-specific risk be diversified away by investing in both Dongwon Metal and Kumho Petro 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 Kumho Petro 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 Kumho Petro Chemical, you can compare the effects of market volatilities on Dongwon Metal and Kumho Petro 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 Kumho Petro. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dongwon Metal and Kumho Petro.
Diversification Opportunities for Dongwon Metal and Kumho Petro
0.86 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Dongwon and Kumho is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding Dongwon Metal Co and Kumho Petro Chemical in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kumho Petro Chemical 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 Kumho Petro. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kumho Petro Chemical has no effect on the direction of Dongwon Metal i.e., Dongwon Metal and Kumho Petro go up and down completely randomly.
Pair Corralation between Dongwon Metal and Kumho Petro
Assuming the 90 days trading horizon Dongwon Metal Co is expected to under-perform the Kumho Petro. In addition to that, Dongwon Metal is 1.3 times more volatile than Kumho Petro Chemical. It trades about -0.3 of its total potential returns per unit of risk. Kumho Petro Chemical is currently generating about -0.24 per unit of volatility. If you would invest 5,790,000 in Kumho Petro Chemical on September 12, 2024 and sell it today you would lose (620,000) from holding Kumho Petro Chemical or give up 10.71% 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. Kumho Petro Chemical
Performance |
| Timeline |
| Dongwon Metal |
| Kumho Petro Chemical |
Dongwon Metal and Kumho Petro Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Dongwon Metal and Kumho Petro
The main advantage of trading using opposite Dongwon Metal and Kumho Petro positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dongwon Metal position performs unexpectedly, Kumho Petro 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 Kumho Petro will offset losses from the drop in Kumho Petro's long position.| Dongwon Metal vs. Samsung Electronics Co | Dongwon Metal vs. Samsung Electronics Co | Dongwon Metal vs. SK Hynix | Dongwon Metal vs. POSCO Holdings |
| Kumho Petro vs. Seoul Electronics Telecom | Kumho Petro vs. SK Chemicals Co | Kumho Petro vs. Kisan Telecom Co | Kumho Petro vs. BIT Computer 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 Money Managers module to screen money managers from public funds and ETFs managed around the world.
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