Correlation Between Dongnam Chemical and Korean Reinsurance
Can any of the company-specific risk be diversified away by investing in both Dongnam Chemical and Korean Reinsurance 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 Dongnam Chemical and Korean Reinsurance into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Dongnam Chemical Co and Korean Reinsurance Co, you can compare the effects of market volatilities on Dongnam Chemical and Korean Reinsurance 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 Dongnam Chemical with a short position of Korean Reinsurance. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dongnam Chemical and Korean Reinsurance.
Diversification Opportunities for Dongnam Chemical and Korean Reinsurance
0.05 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Dongnam and Korean is 0.05. Overlapping area represents the amount of risk that can be diversified away by holding Dongnam Chemical Co and Korean Reinsurance Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Korean Reinsurance and Dongnam Chemical 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 Dongnam Chemical Co are associated (or correlated) with Korean Reinsurance. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Korean Reinsurance has no effect on the direction of Dongnam Chemical i.e., Dongnam Chemical and Korean Reinsurance go up and down completely randomly.
Pair Corralation between Dongnam Chemical and Korean Reinsurance
Assuming the 90 days trading horizon Dongnam Chemical Co is expected to generate 0.67 times more return on investment than Korean Reinsurance. However, Dongnam Chemical Co is 1.48 times less risky than Korean Reinsurance. It trades about 0.36 of its potential returns per unit of risk. Korean Reinsurance Co is currently generating about 0.09 per unit of risk. If you would invest 3,170,000 in Dongnam Chemical Co on October 30, 2024 and sell it today you would earn a total of 235,000 from holding Dongnam Chemical Co or generate 7.41% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Dongnam Chemical Co vs. Korean Reinsurance Co
Performance |
| Timeline |
| Dongnam Chemical |
| Korean Reinsurance |
Dongnam Chemical and Korean Reinsurance Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Dongnam Chemical and Korean Reinsurance
The main advantage of trading using opposite Dongnam Chemical and Korean Reinsurance positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dongnam Chemical position performs unexpectedly, Korean Reinsurance 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 Korean Reinsurance will offset losses from the drop in Korean Reinsurance's long position.| Dongnam Chemical vs. TJ media Co | Dongnam Chemical vs. Dongil Metal Co | Dongnam Chemical vs. Digital Multimedia Technology | Dongnam Chemical vs. SKONEC Entertainment Co |
| Korean Reinsurance vs. PNC Technologies co | Korean Reinsurance vs. Mirai Semiconductors Co | Korean Reinsurance vs. V One Tech Co | Korean Reinsurance vs. Hankukpackage 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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.
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