Correlation Between Dong A and Korea Zinc
Can any of the company-specific risk be diversified away by investing in both Dong A and Korea Zinc 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 and Korea Zinc 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 Korea Zinc, you can compare the effects of market volatilities on Dong A and Korea Zinc 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 with a short position of Korea Zinc. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dong A and Korea Zinc.
Diversification Opportunities for Dong A and Korea Zinc
0.46 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Dong and Korea is 0.46. Overlapping area represents the amount of risk that can be diversified away by holding Dong A Steel Technology and Korea Zinc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Korea Zinc and Dong A 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 Korea Zinc. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Korea Zinc has no effect on the direction of Dong A i.e., Dong A and Korea Zinc go up and down completely randomly.
Pair Corralation between Dong A and Korea Zinc
Assuming the 90 days trading horizon Dong A Steel Technology is expected to generate 1.84 times more return on investment than Korea Zinc. However, Dong A is 1.84 times more volatile than Korea Zinc. It trades about 0.09 of its potential returns per unit of risk. Korea Zinc is currently generating about 0.01 per unit of risk. If you would invest 319,500 in Dong A Steel Technology on September 3, 2024 and sell it today you would earn a total of 20,500 from holding Dong A Steel Technology or generate 6.42% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Dong A Steel Technology vs. Korea Zinc
Performance |
| Timeline |
| Dong A Steel |
| Korea Zinc |
Dong A and Korea Zinc Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Dong A and Korea Zinc
The main advantage of trading using opposite Dong A and Korea Zinc positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dong A position performs unexpectedly, Korea Zinc 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 Korea Zinc will offset losses from the drop in Korea Zinc's long position.| Dong A vs. JC Chemical Co | Dong A vs. Posco Chemical Co | Dong A vs. LG Chemicals | Dong A vs. Digital Power Communications |
| Korea Zinc vs. Dongbu Steel Co | Korea Zinc vs. Heungkuk Metaltech CoLtd | Korea Zinc vs. Fine Besteel Co | Korea Zinc vs. Dong A Steel Technology |
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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..
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