Correlation Between Dong-A Steel and Jeju Bank
Can any of the company-specific risk be diversified away by investing in both Dong-A Steel and Jeju Bank 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 Dong-A Steel and Jeju Bank into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Dong A Steel Technology and Jeju Bank, you can compare the effects of market volatilities on Dong-A Steel and Jeju Bank 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 Dong-A Steel with a short position of Jeju Bank. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dong-A Steel and Jeju Bank.
Diversification Opportunities for Dong-A Steel and Jeju Bank
0.08 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Dong-A and Jeju is 0.08. Overlapping area represents the amount of risk that can be diversified away by holding Dong A Steel Technology and Jeju Bank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Jeju Bank and Dong-A 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 Dong A Steel Technology are associated (or correlated) with Jeju Bank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Jeju Bank has no effect on the direction of Dong-A Steel i.e., Dong-A Steel and Jeju Bank go up and down completely randomly.
Pair Corralation between Dong-A Steel and Jeju Bank
Assuming the 90 days trading horizon Dong A Steel Technology is expected to under-perform the Jeju Bank. But the stock apears to be less risky and, when comparing its historical volatility, Dong A Steel Technology is 1.52 times less risky than Jeju Bank. The stock trades about -0.03 of its potential returns per unit of risk. The Jeju Bank is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest 870,993 in Jeju Bank on September 12, 2024 and sell it today you would lose (138,993) from holding Jeju Bank or give up 15.96% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Dong A Steel Technology vs. Jeju Bank
Performance |
| Timeline |
| Dong A Steel |
| Jeju Bank |
Dong-A Steel and Jeju Bank Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Dong-A Steel and Jeju Bank
The main advantage of trading using opposite Dong-A Steel and Jeju Bank positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dong-A Steel position performs unexpectedly, Jeju Bank 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 Jeju Bank will offset losses from the drop in Jeju Bank's long position.| Dong-A Steel vs. Samsung Electronics Co | Dong-A Steel vs. Samsung Electronics Co | Dong-A Steel vs. SK Hynix | Dong-A Steel vs. POSCO Holdings |
| Jeju Bank vs. Samsung Electronics Co | Jeju Bank vs. Samsung Electronics Co | Jeju Bank vs. SK Hynix | Jeju Bank vs. POSCO Holdings |
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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.
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