Correlation Between Dong A and RF Materials
Can any of the company-specific risk be diversified away by investing in both Dong A and RF Materials 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 RF Materials 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 RF Materials Co, you can compare the effects of market volatilities on Dong A and RF Materials 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 RF Materials. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dong A and RF Materials.
Diversification Opportunities for Dong A and RF Materials
0.64 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Dong and 327260 is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding Dong A Steel Technology and RF Materials Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on RF Materials 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 RF Materials. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of RF Materials has no effect on the direction of Dong A i.e., Dong A and RF Materials go up and down completely randomly.
Pair Corralation between Dong A and RF Materials
Assuming the 90 days trading horizon Dong A is expected to generate 1.04 times less return on investment than RF Materials. But when comparing it to its historical volatility, Dong A Steel Technology is 1.37 times less risky than RF Materials. It trades about 0.28 of its potential returns per unit of risk. RF Materials Co is currently generating about 0.21 of returns per unit of risk over similar time horizon. If you would invest 477,000 in RF Materials Co on October 13, 2024 and sell it today you would earn a total of 43,000 from holding RF Materials Co or generate 9.01% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Dong A Steel Technology vs. RF Materials Co
Performance |
| Timeline |
| Dong A Steel |
| RF Materials |
Dong A and RF Materials Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Dong A and RF Materials
The main advantage of trading using opposite Dong A and RF Materials positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dong A position performs unexpectedly, RF Materials 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 RF Materials will offset losses from the drop in RF Materials' long position.| Dong A vs. AptaBio Therapeutics | Dong A vs. Daewoo SBI SPAC | Dong A vs. Dream Security co | Dong A vs. Microfriend |
| RF Materials vs. Dong A Steel Technology | RF Materials vs. BIT Computer Co | RF Materials vs. T3 Entertainment Co | RF Materials vs. TJ media 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.
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