Correlation Between Dongnam Chemical and SK Chemicals
Can any of the company-specific risk be diversified away by investing in both Dongnam Chemical and SK Chemicals 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 SK Chemicals 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 SK Chemicals Co, you can compare the effects of market volatilities on Dongnam Chemical and SK Chemicals 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 SK Chemicals. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dongnam Chemical and SK Chemicals.
Diversification Opportunities for Dongnam Chemical and SK Chemicals
0.82 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Dongnam and 285130 is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding Dongnam Chemical Co and SK Chemicals Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SK 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 SK Chemicals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SK Chemicals has no effect on the direction of Dongnam Chemical i.e., Dongnam Chemical and SK Chemicals go up and down completely randomly.
Pair Corralation between Dongnam Chemical and SK Chemicals
Assuming the 90 days trading horizon Dongnam Chemical Co is expected to generate 0.63 times more return on investment than SK Chemicals. However, Dongnam Chemical Co is 1.59 times less risky than SK Chemicals. It trades about -0.09 of its potential returns per unit of risk. SK Chemicals Co is currently generating about -0.06 per unit of risk. If you would invest 5,167,125 in Dongnam Chemical Co on September 3, 2024 and sell it today you would lose (2,192,125) from holding Dongnam Chemical Co or give up 42.42% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Dongnam Chemical Co vs. SK Chemicals Co
Performance |
| Timeline |
| Dongnam Chemical |
| SK Chemicals |
Dongnam Chemical and SK Chemicals Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Dongnam Chemical and SK Chemicals
The main advantage of trading using opposite Dongnam Chemical and SK Chemicals positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dongnam Chemical position performs unexpectedly, SK Chemicals 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 SK Chemicals will offset losses from the drop in SK Chemicals' long position.| Dongnam Chemical vs. BNK Financial Group | Dongnam Chemical vs. FNSTech Co | Dongnam Chemical vs. Shinhan Financial Group | Dongnam Chemical vs. Korea Shipbuilding Offshore |
| SK Chemicals vs. LG Chemicals | SK Chemicals vs. POSCO Holdings | SK Chemicals vs. Hanwha Solutions | SK Chemicals vs. Lotte Chemical Corp |
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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.
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