Correlation Between Daedong Steel and Hansol Homedeco
Can any of the company-specific risk be diversified away by investing in both Daedong Steel and Hansol Homedeco 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 Daedong Steel and Hansol Homedeco into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Daedong Steel Co and Hansol Homedeco Co, you can compare the effects of market volatilities on Daedong Steel and Hansol Homedeco 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 Daedong Steel with a short position of Hansol Homedeco. Check out your portfolio center. Please also check ongoing floating volatility patterns of Daedong Steel and Hansol Homedeco.
Diversification Opportunities for Daedong Steel and Hansol Homedeco
0.83 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Daedong and Hansol is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding Daedong Steel Co and Hansol Homedeco Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hansol Homedeco and Daedong 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 Daedong Steel Co are associated (or correlated) with Hansol Homedeco. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hansol Homedeco has no effect on the direction of Daedong Steel i.e., Daedong Steel and Hansol Homedeco go up and down completely randomly.
Pair Corralation between Daedong Steel and Hansol Homedeco
Assuming the 90 days trading horizon Daedong Steel Co is expected to generate 1.52 times more return on investment than Hansol Homedeco. However, Daedong Steel is 1.52 times more volatile than Hansol Homedeco Co. It trades about -0.02 of its potential returns per unit of risk. Hansol Homedeco Co is currently generating about -0.14 per unit of risk. If you would invest 369,500 in Daedong Steel Co on August 31, 2024 and sell it today you would lose (10,500) from holding Daedong Steel Co or give up 2.84% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Daedong Steel Co vs. Hansol Homedeco Co
Performance |
| Timeline |
| Daedong Steel |
| Hansol Homedeco |
Daedong Steel and Hansol Homedeco Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Daedong Steel and Hansol Homedeco
The main advantage of trading using opposite Daedong Steel and Hansol Homedeco positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Daedong Steel position performs unexpectedly, Hansol Homedeco 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 Hansol Homedeco will offset losses from the drop in Hansol Homedeco's long position.| Daedong Steel vs. Keum Kang Steel | Daedong Steel vs. Tplex Co | Daedong Steel vs. PJ Metal Co | Daedong Steel vs. Gyeongnam Steel Co |
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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 Dashboard module to portfolio dashboard that provides centralized access to all your investments.
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