Correlation Between Dongwon Metal and Top Material
Can any of the company-specific risk be diversified away by investing in both Dongwon Metal and Top Material 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 Top Material 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 Top Material Co, you can compare the effects of market volatilities on Dongwon Metal and Top Material 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 Top Material. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dongwon Metal and Top Material.
Diversification Opportunities for Dongwon Metal and Top Material
0.87 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Dongwon and Top is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding Dongwon Metal Co and Top Material Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Top Material 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 Top Material. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Top Material has no effect on the direction of Dongwon Metal i.e., Dongwon Metal and Top Material go up and down completely randomly.
Pair Corralation between Dongwon Metal and Top Material
Assuming the 90 days trading horizon Dongwon Metal Co is expected to generate 0.64 times more return on investment than Top Material. However, Dongwon Metal Co is 1.56 times less risky than Top Material. It trades about -0.15 of its potential returns per unit of risk. Top Material Co is currently generating about -0.16 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. Top Material Co
Performance |
| Timeline |
| Dongwon Metal |
| Top Material |
Dongwon Metal and Top Material Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Dongwon Metal and Top Material
The main advantage of trading using opposite Dongwon Metal and Top Material positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dongwon Metal position performs unexpectedly, Top Material 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 Top Material will offset losses from the drop in Top Material'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 |
| Top Material vs. Samsung Electronics Co | Top Material vs. Samsung Electronics Co | Top Material vs. LG Energy Solution | Top Material vs. SK Hynix |
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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.
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