Correlation Between Gyeongnam Steel and Daechang Steel
Can any of the company-specific risk be diversified away by investing in both Gyeongnam Steel and Daechang 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 Daechang 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 Daechang Steel Co, you can compare the effects of market volatilities on Gyeongnam Steel and Daechang 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 Daechang Steel. Check out your portfolio center. Please also check ongoing floating volatility patterns of Gyeongnam Steel and Daechang Steel.
Diversification Opportunities for Gyeongnam Steel and Daechang Steel
0.33 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Gyeongnam and Daechang is 0.33. Overlapping area represents the amount of risk that can be diversified away by holding Gyeongnam Steel Co and Daechang Steel Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Daechang 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 Daechang Steel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Daechang Steel has no effect on the direction of Gyeongnam Steel i.e., Gyeongnam Steel and Daechang Steel go up and down completely randomly.
Pair Corralation between Gyeongnam Steel and Daechang Steel
Assuming the 90 days trading horizon Gyeongnam Steel Co is expected to generate 0.92 times more return on investment than Daechang Steel. However, Gyeongnam Steel Co is 1.09 times less risky than Daechang Steel. It trades about 0.18 of its potential returns per unit of risk. Daechang Steel Co is currently generating about 0.02 per unit of risk. If you would invest 275,500 in Gyeongnam Steel Co on August 29, 2024 and sell it today you would earn a total of 21,000 from holding Gyeongnam Steel Co or generate 7.62% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Gyeongnam Steel Co vs. Daechang Steel Co
Performance |
| Timeline |
| Gyeongnam Steel |
| Daechang Steel |
Gyeongnam Steel and Daechang Steel Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Gyeongnam Steel and Daechang Steel
The main advantage of trading using opposite Gyeongnam Steel and Daechang Steel positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Gyeongnam Steel position performs unexpectedly, Daechang 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 Daechang Steel will offset losses from the drop in Daechang Steel's long position.| Gyeongnam Steel vs. Sangsin Energy Display | Gyeongnam Steel vs. Dongbang Transport Logistics | Gyeongnam Steel vs. DB Insurance Co | Gyeongnam Steel vs. Digital Power Communications |
| Daechang Steel vs. LG Chemicals | Daechang Steel vs. Lotte Chemical Corp | Daechang Steel vs. Hyundai Steel | Daechang Steel vs. Seah Steel 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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.
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