Correlation Between Dongnam Chemical and Kukdo Chemical
Can any of the company-specific risk be diversified away by investing in both Dongnam Chemical and Kukdo Chemical 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 Kukdo Chemical 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 Kukdo Chemical Co, you can compare the effects of market volatilities on Dongnam Chemical and Kukdo Chemical 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 Kukdo Chemical. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dongnam Chemical and Kukdo Chemical.
Diversification Opportunities for Dongnam Chemical and Kukdo Chemical
0.38 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Dongnam and Kukdo is 0.38. Overlapping area represents the amount of risk that can be diversified away by holding Dongnam Chemical Co and Kukdo Chemical Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kukdo Chemical 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 Kukdo Chemical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kukdo Chemical has no effect on the direction of Dongnam Chemical i.e., Dongnam Chemical and Kukdo Chemical go up and down completely randomly.
Pair Corralation between Dongnam Chemical and Kukdo Chemical
Assuming the 90 days trading horizon Dongnam Chemical Co is expected to generate 0.66 times more return on investment than Kukdo Chemical. However, Dongnam Chemical Co is 1.51 times less risky than Kukdo Chemical. It trades about 0.04 of its potential returns per unit of risk. Kukdo Chemical Co is currently generating about -0.05 per unit of risk. If you would invest 3,092,777 in Dongnam Chemical Co on November 4, 2024 and sell it today you would earn a total of 312,223 from holding Dongnam Chemical Co or generate 10.1% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Dongnam Chemical Co vs. Kukdo Chemical Co
Performance |
| Timeline |
| Dongnam Chemical |
| Kukdo Chemical |
Dongnam Chemical and Kukdo Chemical Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Dongnam Chemical and Kukdo Chemical
The main advantage of trading using opposite Dongnam Chemical and Kukdo Chemical positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dongnam Chemical position performs unexpectedly, Kukdo Chemical 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 Kukdo Chemical will offset losses from the drop in Kukdo Chemical's long position.| Dongnam Chemical vs. LAKE MATERIALS LTD | Dongnam Chemical vs. Kolon Plastics | Dongnam Chemical vs. Hana Materials | Dongnam Chemical vs. EV Advanced Material |
| Kukdo Chemical vs. Samyung Trading Co | Kukdo Chemical vs. Narae Nanotech Corp | Kukdo Chemical vs. Daelim Trading Co | Kukdo Chemical vs. FNSTech 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.
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