Correlation Between Gyeongnam Steel and Dongbu Steel
Can any of the company-specific risk be diversified away by investing in both Gyeongnam Steel and Dongbu Steel 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 Gyeongnam Steel and Dongbu Steel into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Gyeongnam Steel Co and Dongbu Steel Co, you can compare the effects of market volatilities on Gyeongnam Steel and Dongbu Steel 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 Gyeongnam Steel with a short position of Dongbu Steel. Check out your portfolio center. Please also check ongoing floating volatility patterns of Gyeongnam Steel and Dongbu Steel.
Diversification Opportunities for Gyeongnam Steel and Dongbu Steel
-0.07 | Correlation Coefficient |
Good diversification
The 3 months correlation between Gyeongnam and Dongbu is -0.07. Overlapping area represents the amount of risk that can be diversified away by holding Gyeongnam Steel Co and Dongbu Steel Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dongbu Steel and Gyeongnam 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 Gyeongnam Steel Co are associated (or correlated) with Dongbu Steel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dongbu Steel has no effect on the direction of Gyeongnam Steel i.e., Gyeongnam Steel and Dongbu Steel go up and down completely randomly.
Pair Corralation between Gyeongnam Steel and Dongbu Steel
Assuming the 90 days trading horizon Gyeongnam Steel Co is expected to generate 0.86 times more return on investment than Dongbu Steel. However, Gyeongnam Steel Co is 1.16 times less risky than Dongbu Steel. It trades about 0.21 of its potential returns per unit of risk. Dongbu Steel Co is currently generating about -0.1 per unit of risk. If you would invest 279,500 in Gyeongnam Steel Co on August 25, 2024 and sell it today you would earn a total of 26,500 from holding Gyeongnam Steel Co or generate 9.48% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Gyeongnam Steel Co vs. Dongbu Steel Co
Performance |
| Timeline |
| Gyeongnam Steel |
| Dongbu Steel |
Gyeongnam Steel and Dongbu Steel Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Gyeongnam Steel and Dongbu Steel
The main advantage of trading using opposite Gyeongnam Steel and Dongbu Steel positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Gyeongnam Steel position performs unexpectedly, Dongbu Steel 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 Dongbu Steel will offset losses from the drop in Dongbu Steel's long position.| Gyeongnam Steel vs. Ecoplastic | Gyeongnam Steel vs. Union Materials Corp | Gyeongnam Steel vs. LAKE MATERIALS LTD | Gyeongnam Steel vs. Hyosung Advanced Materials |
| Dongbu Steel vs. LG Chemicals | Dongbu Steel vs. POSCO Holdings | Dongbu Steel vs. Lotte Chemical Corp | Dongbu Steel vs. Hyundai Steel |
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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.
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