Correlation Between Dong A and Korea Electric
Can any of the company-specific risk be diversified away by investing in both Dong A and Korea Electric 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 Electric 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 Electric Power, you can compare the effects of market volatilities on Dong A and Korea Electric 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 Electric. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dong A and Korea Electric.
Diversification Opportunities for Dong A and Korea Electric
0.55 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Dong and Korea is 0.55. Overlapping area represents the amount of risk that can be diversified away by holding Dong A Steel Technology and Korea Electric Power in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Korea Electric Power 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 Electric. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Korea Electric Power has no effect on the direction of Dong A i.e., Dong A and Korea Electric go up and down completely randomly.
Pair Corralation between Dong A and Korea Electric
Assuming the 90 days trading horizon Dong A Steel Technology is expected to generate 1.21 times more return on investment than Korea Electric. However, Dong A is 1.21 times more volatile than Korea Electric Power. It trades about 0.36 of its potential returns per unit of risk. Korea Electric Power is currently generating about 0.02 per unit of risk. If you would invest 283,274 in Dong A Steel Technology on October 23, 2024 and sell it today you would earn a total of 31,726 from holding Dong A Steel Technology or generate 11.2% 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 Electric Power
Performance |
| Timeline |
| Dong A Steel |
| Korea Electric Power |
Dong A and Korea Electric Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Dong A and Korea Electric
The main advantage of trading using opposite Dong A and Korea Electric positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dong A position performs unexpectedly, Korea Electric 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 Electric will offset losses from the drop in Korea Electric's long position.| Dong A vs. KyungIn Electronics Co | Dong A vs. HB Technology TD | Dong A vs. SungMoon Electronics Co | Dong A vs. Lotte Chilsung Beverage |
| Korea Electric vs. Dong A Steel Technology | Korea Electric vs. PJ Metal Co | Korea Electric vs. Songwon Industrial Co | Korea Electric vs. Eagon Industrial 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 Transaction History module to view history of all your transactions and understand their impact on performance.
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