Correlation Between Global Standard and Dong A
Can any of the company-specific risk be diversified away by investing in both Global Standard 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 Global Standard and Dong A into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Global Standard Technology and Dong A Steel Technology, you can compare the effects of market volatilities on Global Standard 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 Global Standard with a short position of Dong A. Check out your portfolio center. Please also check ongoing floating volatility patterns of Global Standard and Dong A.
Diversification Opportunities for Global Standard and Dong A
0.05 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Global and Dong is 0.05. Overlapping area represents the amount of risk that can be diversified away by holding Global Standard Technology 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 Global Standard 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 Global Standard Technology 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 Global Standard i.e., Global Standard and Dong A go up and down completely randomly.
Pair Corralation between Global Standard and Dong A
Assuming the 90 days trading horizon Global Standard is expected to generate 2.56 times less return on investment than Dong A. But when comparing it to its historical volatility, Global Standard Technology is 1.29 times less risky than Dong A. It trades about 0.06 of its potential returns per unit of risk. Dong A Steel Technology is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest 322,000 in Dong A Steel Technology on August 29, 2024 and sell it today you would earn a total of 29,500 from holding Dong A Steel Technology or generate 9.16% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Global Standard Technology vs. Dong A Steel Technology
Performance |
| Timeline |
| Global Standard Tech |
| Dong A Steel |
Global Standard and Dong A Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Global Standard and Dong A
The main advantage of trading using opposite Global Standard and Dong A positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Global Standard 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.| Global Standard vs. Korea Real Estate | Global Standard vs. Korea Ratings Co | Global Standard vs. IQuest Co | Global Standard vs. Wonbang Tech Co |
| Dong A vs. AptaBio Therapeutics | Dong A vs. Daewoo SBI SPAC | Dong A vs. Dream Security co | Dong A vs. Microfriend |
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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