Correlation Between Hankuk Steel and Dong A
Can any of the company-specific risk be diversified away by investing in both Hankuk Steel and Dong A 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 Hankuk Steel and Dong A into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Hankuk Steel Wire and Dong A Eltek, you can compare the effects of market volatilities on Hankuk Steel and Dong A 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 Hankuk Steel with a short position of Dong A. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hankuk Steel and Dong A.
Diversification Opportunities for Hankuk Steel and Dong A
-0.26 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Hankuk and Dong is -0.26. Overlapping area represents the amount of risk that can be diversified away by holding Hankuk Steel Wire and Dong A Eltek in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dong A Eltek and Hankuk Steel 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 Hankuk Steel Wire are associated (or correlated) with Dong A. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dong A Eltek has no effect on the direction of Hankuk Steel i.e., Hankuk Steel and Dong A go up and down completely randomly.
Pair Corralation between Hankuk Steel and Dong A
Assuming the 90 days trading horizon Hankuk Steel Wire is expected to generate 0.62 times more return on investment than Dong A. However, Hankuk Steel Wire is 1.61 times less risky than Dong A. It trades about 0.03 of its potential returns per unit of risk. Dong A Eltek is currently generating about -0.17 per unit of risk. If you would invest 287,000 in Hankuk Steel Wire on September 2, 2024 and sell it today you would earn a total of 3,000 from holding Hankuk Steel Wire or generate 1.05% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Hankuk Steel Wire vs. Dong A Eltek
Performance |
| Timeline |
| Hankuk Steel Wire |
| Dong A Eltek |
Hankuk Steel and Dong A Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Hankuk Steel and Dong A
The main advantage of trading using opposite Hankuk Steel and Dong A positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Hankuk Steel position performs unexpectedly, Dong A 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 Dong A will offset losses from the drop in Dong A's long position.| Hankuk Steel vs. LG Chemicals | Hankuk Steel vs. POSCO Holdings | Hankuk Steel vs. Hanwha Solutions | Hankuk Steel vs. Hyundai Steel |
| Dong A vs. Nable Communications | Dong A vs. Lotte Data Communication | Dong A vs. Sam Yang Foods | Dong A vs. Inzi Display CoLtd |
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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.
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