Correlation Between Keum Kang and Daedong Steel
Can any of the company-specific risk be diversified away by investing in both Keum Kang and Daedong 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 Keum Kang and Daedong Steel into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Keum Kang Steel and Daedong Steel Co, you can compare the effects of market volatilities on Keum Kang and Daedong 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 Keum Kang with a short position of Daedong Steel. Check out your portfolio center. Please also check ongoing floating volatility patterns of Keum Kang and Daedong Steel.
Diversification Opportunities for Keum Kang and Daedong Steel
0.79 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Keum and Daedong is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding Keum Kang Steel and Daedong Steel Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Daedong Steel and Keum Kang 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 Keum Kang Steel are associated (or correlated) with Daedong Steel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Daedong Steel has no effect on the direction of Keum Kang i.e., Keum Kang and Daedong Steel go up and down completely randomly.
Pair Corralation between Keum Kang and Daedong Steel
Assuming the 90 days trading horizon Keum Kang Steel is expected to under-perform the Daedong Steel. In addition to that, Keum Kang is 1.38 times more volatile than Daedong Steel Co. It trades about -0.12 of its total potential returns per unit of risk. Daedong Steel Co is currently generating about -0.1 per unit of volatility. If you would invest 373,000 in Daedong Steel Co on August 28, 2024 and sell it today you would lose (21,000) from holding Daedong Steel Co or give up 5.63% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Keum Kang Steel vs. Daedong Steel Co
Performance |
| Timeline |
| Keum Kang Steel |
| Daedong Steel |
Keum Kang and Daedong Steel Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Keum Kang and Daedong Steel
The main advantage of trading using opposite Keum Kang and Daedong Steel positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Keum Kang position performs unexpectedly, Daedong 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 Daedong Steel will offset losses from the drop in Daedong Steel's long position.| Keum Kang vs. LG Chemicals | Keum Kang vs. Lotte Chemical Corp | Keum Kang vs. Hyundai Steel | Keum Kang vs. Seah Steel Corp |
| Daedong Steel vs. Keum Kang Steel | Daedong Steel vs. Tplex Co | Daedong Steel vs. PJ Metal Co | Daedong Steel vs. Samhyun Steel Co |
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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.
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