Correlation Between Dongwon Metal and Hanjoo Light
Can any of the company-specific risk be diversified away by investing in both Dongwon Metal and Hanjoo Light 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 Hanjoo Light 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 Hanjoo Light Metal, you can compare the effects of market volatilities on Dongwon Metal and Hanjoo Light 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 Hanjoo Light. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dongwon Metal and Hanjoo Light.
Diversification Opportunities for Dongwon Metal and Hanjoo Light
0.75 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Dongwon and Hanjoo is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Dongwon Metal Co and Hanjoo Light Metal in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hanjoo Light 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 Hanjoo Light. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hanjoo Light Metal has no effect on the direction of Dongwon Metal i.e., Dongwon Metal and Hanjoo Light go up and down completely randomly.
Pair Corralation between Dongwon Metal and Hanjoo Light
Assuming the 90 days trading horizon Dongwon Metal Co is expected to generate 0.79 times more return on investment than Hanjoo Light. However, Dongwon Metal Co is 1.26 times less risky than Hanjoo Light. It trades about -0.25 of its potential returns per unit of risk. Hanjoo Light Metal is currently generating about -0.2 per unit of risk. If you would invest 147,100 in Dongwon Metal Co on August 28, 2024 and sell it today you would lose (32,800) from holding Dongwon Metal Co or give up 22.3% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Dongwon Metal Co vs. Hanjoo Light Metal
Performance |
| Timeline |
| Dongwon Metal |
| Hanjoo Light Metal |
Dongwon Metal and Hanjoo Light Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Dongwon Metal and Hanjoo Light
The main advantage of trading using opposite Dongwon Metal and Hanjoo Light positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dongwon Metal position performs unexpectedly, Hanjoo Light 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 Hanjoo Light will offset losses from the drop in Hanjoo Light's long position.| Dongwon Metal vs. AptaBio Therapeutics | Dongwon Metal vs. Daewoo SBI SPAC | Dongwon Metal vs. Dream Security co | Dongwon Metal vs. Microfriend |
| Hanjoo Light vs. TOPMATERIAL LTD | Hanjoo Light vs. Korea Shipbuilding Offshore | Hanjoo Light vs. Polaris Office Corp | Hanjoo Light vs. National Plastic 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.
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