Correlation Between Dong-A Steel and Hyundai Engineering
Can any of the company-specific risk be diversified away by investing in both Dong-A Steel and Hyundai Engineering 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 Hyundai Engineering 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 Hyundai Engineering Plastics, you can compare the effects of market volatilities on Dong-A Steel and Hyundai Engineering 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 Hyundai Engineering. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dong-A Steel and Hyundai Engineering.
Diversification Opportunities for Dong-A Steel and Hyundai Engineering
-0.09 | Correlation Coefficient |
Good diversification
The 3 months correlation between Dong-A and Hyundai is -0.09. Overlapping area represents the amount of risk that can be diversified away by holding Dong A Steel Technology and Hyundai Engineering Plastics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hyundai Engineering 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 Hyundai Engineering. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hyundai Engineering has no effect on the direction of Dong-A Steel i.e., Dong-A Steel and Hyundai Engineering go up and down completely randomly.
Pair Corralation between Dong-A Steel and Hyundai Engineering
Assuming the 90 days trading horizon Dong A Steel Technology is expected to under-perform the Hyundai Engineering. In addition to that, Dong-A Steel is 1.86 times more volatile than Hyundai Engineering Plastics. It trades about -0.19 of its total potential returns per unit of risk. Hyundai Engineering Plastics is currently generating about -0.14 per unit of volatility. If you would invest 374,000 in Hyundai Engineering Plastics on September 13, 2024 and sell it today you would lose (27,500) from holding Hyundai Engineering Plastics or give up 7.35% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Dong A Steel Technology vs. Hyundai Engineering Plastics
Performance |
| Timeline |
| Dong A Steel |
| Hyundai Engineering |
Dong-A Steel and Hyundai Engineering Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Dong-A Steel and Hyundai Engineering
The main advantage of trading using opposite Dong-A Steel and Hyundai Engineering positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dong-A Steel position performs unexpectedly, Hyundai Engineering 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 Hyundai Engineering will offset losses from the drop in Hyundai Engineering'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 |
| Hyundai Engineering vs. Samsung Electronics Co | Hyundai Engineering vs. Samsung Electronics Co | Hyundai Engineering vs. SK Hynix | Hyundai Engineering 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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.
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