Correlation Between System and Dong A
Can any of the company-specific risk be diversified away by investing in both System and Dong A 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 System and Dong A into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between System and Application and Dong A Steel Technology, you can compare the effects of market volatilities on System and Dong A 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 System with a short position of Dong A. Check out your portfolio center. Please also check ongoing floating volatility patterns of System and Dong A.
Diversification Opportunities for System and Dong A
Very good diversification
The 3 months correlation between System and Dong is -0.26. Overlapping area represents the amount of risk that can be diversified away by holding System and Application and Dong A Steel Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dong A Steel and System 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 System and Application are associated (or correlated) with Dong A. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dong A Steel has no effect on the direction of System i.e., System and Dong A go up and down completely randomly.
Pair Corralation between System and Dong A
Assuming the 90 days trading horizon System is expected to generate 4.91 times less return on investment than Dong A. In addition to that, System is 1.49 times more volatile than Dong A Steel Technology. It trades about 0.05 of its total potential returns per unit of risk. Dong A Steel Technology is currently generating about 0.36 per unit of volatility. If you would invest 285,500 in Dong A Steel Technology on October 30, 2024 and sell it today you would earn a total of 32,500 from holding Dong A Steel Technology or generate 11.38% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
System and Application vs. Dong A Steel Technology
Performance |
| Timeline |
| System and Application |
| Dong A Steel |
System and Dong A Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with System and Dong A
The main advantage of trading using opposite System and Dong A positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if System position performs unexpectedly, Dong A 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 Dong A will offset losses from the drop in Dong A's long position.| System vs. KPX Green Chemical | System vs. Namhae Chemical | System vs. Youl Chon Chemical | System vs. Hanjin Transportation Co |
| Dong A vs. Hyundai Industrial Co | Dong A vs. Daesung Industrial Co | Dong A vs. Sung Bo Chemicals | Dong A vs. Pyung Hwa Industrial |
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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.
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