Correlation Between Daehan Steel and Korea Computer
Can any of the company-specific risk be diversified away by investing in both Daehan Steel and Korea Computer 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 Daehan Steel and Korea Computer into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Daehan Steel and Korea Computer Systems, you can compare the effects of market volatilities on Daehan Steel and Korea Computer 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 Daehan Steel with a short position of Korea Computer. Check out your portfolio center. Please also check ongoing floating volatility patterns of Daehan Steel and Korea Computer.
Diversification Opportunities for Daehan Steel and Korea Computer
0.7 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Daehan and Korea is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding Daehan Steel and Korea Computer Systems in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Korea Computer Systems and Daehan 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 Daehan Steel are associated (or correlated) with Korea Computer. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Korea Computer Systems has no effect on the direction of Daehan Steel i.e., Daehan Steel and Korea Computer go up and down completely randomly.
Pair Corralation between Daehan Steel and Korea Computer
Assuming the 90 days trading horizon Daehan Steel is expected to generate 1632.4 times less return on investment than Korea Computer. But when comparing it to its historical volatility, Daehan Steel is 8.05 times less risky than Korea Computer. It trades about 0.0 of its potential returns per unit of risk. Korea Computer Systems is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest 953,963 in Korea Computer Systems on October 25, 2024 and sell it today you would earn a total of 244,037 from holding Korea Computer Systems or generate 25.58% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Daehan Steel vs. Korea Computer Systems
Performance |
| Timeline |
| Daehan Steel |
| Korea Computer Systems |
Daehan Steel and Korea Computer Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Daehan Steel and Korea Computer
The main advantage of trading using opposite Daehan Steel and Korea Computer positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Daehan Steel position performs unexpectedly, Korea Computer 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 Computer will offset losses from the drop in Korea Computer's long position.| Daehan Steel vs. Wireless Power Amplifier | Daehan Steel vs. Ssangyong Information Communication | Daehan Steel vs. Shinil Industrial Co | Daehan Steel vs. Korea Air Svc |
| Korea Computer vs. Daehan Steel | Korea Computer vs. Digital Power Communications | Korea Computer vs. Sewoon Medical Co | Korea Computer vs. Finebesteel |
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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.
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