Correlation Between Dongnam Chemical and Kukdong Oil
Can any of the company-specific risk be diversified away by investing in both Dongnam Chemical and Kukdong Oil 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 Kukdong Oil 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 Kukdong Oil Chemicals, you can compare the effects of market volatilities on Dongnam Chemical and Kukdong Oil 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 Kukdong Oil. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dongnam Chemical and Kukdong Oil.
Diversification Opportunities for Dongnam Chemical and Kukdong Oil
0.58 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Dongnam and Kukdong is 0.58. Overlapping area represents the amount of risk that can be diversified away by holding Dongnam Chemical Co and Kukdong Oil Chemicals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kukdong Oil Chemicals 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 Kukdong Oil. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kukdong Oil Chemicals has no effect on the direction of Dongnam Chemical i.e., Dongnam Chemical and Kukdong Oil go up and down completely randomly.
Pair Corralation between Dongnam Chemical and Kukdong Oil
Assuming the 90 days trading horizon Dongnam Chemical Co is expected to generate 1.32 times more return on investment than Kukdong Oil. However, Dongnam Chemical is 1.32 times more volatile than Kukdong Oil Chemicals. It trades about 0.44 of its potential returns per unit of risk. Kukdong Oil Chemicals is currently generating about 0.08 per unit of risk. If you would invest 3,145,000 in Dongnam Chemical Co on October 22, 2024 and sell it today you would earn a total of 280,000 from holding Dongnam Chemical Co or generate 8.9% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Dongnam Chemical Co vs. Kukdong Oil Chemicals
Performance |
| Timeline |
| Dongnam Chemical |
| Kukdong Oil Chemicals |
Dongnam Chemical and Kukdong Oil Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Dongnam Chemical and Kukdong Oil
The main advantage of trading using opposite Dongnam Chemical and Kukdong Oil positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dongnam Chemical position performs unexpectedly, Kukdong Oil 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 Kukdong Oil will offset losses from the drop in Kukdong Oil's long position.| Dongnam Chemical vs. Lotte Data Communication | Dongnam Chemical vs. Jeju Beer Co | Dongnam Chemical vs. Sungmoon Electronics Co | Dongnam Chemical vs. PJ Electronics Co |
| Kukdong Oil vs. Samlip General Foods | Kukdong Oil vs. iNtRON Biotechnology | Kukdong Oil vs. Cheryong Industrial CoLtd | Kukdong Oil vs. Namhwa Industrial 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.
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