Correlation Between Dongnam Chemical and Danal
Can any of the company-specific risk be diversified away by investing in both Dongnam Chemical and Danal 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 Danal 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 Danal Co, you can compare the effects of market volatilities on Dongnam Chemical and Danal 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 Danal. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dongnam Chemical and Danal.
Diversification Opportunities for Dongnam Chemical and Danal
0.61 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Dongnam and Danal is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding Dongnam Chemical Co and Danal Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Danal 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 Danal. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Danal has no effect on the direction of Dongnam Chemical i.e., Dongnam Chemical and Danal go up and down completely randomly.
Pair Corralation between Dongnam Chemical and Danal
Assuming the 90 days trading horizon Dongnam Chemical is expected to generate 1.52 times less return on investment than Danal. But when comparing it to its historical volatility, Dongnam Chemical Co is 2.08 times less risky than Danal. It trades about 0.04 of its potential returns per unit of risk. Danal Co is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest 300,000 in Danal Co on November 3, 2024 and sell it today you would earn a total of 14,000 from holding Danal Co or generate 4.67% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Dongnam Chemical Co vs. Danal Co
Performance |
| Timeline |
| Dongnam Chemical |
| Danal |
Dongnam Chemical and Danal Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Dongnam Chemical and Danal
The main advantage of trading using opposite Dongnam Chemical and Danal positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dongnam Chemical position performs unexpectedly, Danal 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 Danal will offset losses from the drop in Danal's long position.| Dongnam Chemical vs. Daejung Chemicals Metals | Dongnam Chemical vs. Hanjin Transportation Co | Dongnam Chemical vs. Taegu Broadcasting | Dongnam Chemical vs. Duksan Hi Metal |
| Danal vs. Korean Reinsurance Co | Danal vs. Kukdong Oil Chemicals | Danal vs. Neungyule Education | Danal vs. Jeju Bank |
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 Commodity Directory module to find actively traded commodities issued by global exchanges.
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