Correlation Between Dongwoo Farm and Ajusteel
Can any of the company-specific risk be diversified away by investing in both Dongwoo Farm and Ajusteel 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 Dongwoo Farm and Ajusteel into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Dongwoo Farm To and Ajusteel Co, you can compare the effects of market volatilities on Dongwoo Farm and Ajusteel 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 Dongwoo Farm with a short position of Ajusteel. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dongwoo Farm and Ajusteel.
Diversification Opportunities for Dongwoo Farm and Ajusteel
0.87 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Dongwoo and Ajusteel is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding Dongwoo Farm To and Ajusteel Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ajusteel and Dongwoo Farm 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 Dongwoo Farm To are associated (or correlated) with Ajusteel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ajusteel has no effect on the direction of Dongwoo Farm i.e., Dongwoo Farm and Ajusteel go up and down completely randomly.
Pair Corralation between Dongwoo Farm and Ajusteel
Assuming the 90 days trading horizon Dongwoo Farm To is expected to generate 0.85 times more return on investment than Ajusteel. However, Dongwoo Farm To is 1.18 times less risky than Ajusteel. It trades about -0.04 of its potential returns per unit of risk. Ajusteel Co is currently generating about -0.09 per unit of risk. If you would invest 274,500 in Dongwoo Farm To on September 3, 2024 and sell it today you would lose (83,500) from holding Dongwoo Farm To or give up 30.42% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Dongwoo Farm To vs. Ajusteel Co
Performance |
| Timeline |
| Dongwoo Farm To |
| Ajusteel |
Dongwoo Farm and Ajusteel Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Dongwoo Farm and Ajusteel
The main advantage of trading using opposite Dongwoo Farm and Ajusteel positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dongwoo Farm position performs unexpectedly, Ajusteel 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 Ajusteel will offset losses from the drop in Ajusteel's long position.| Dongwoo Farm vs. Hanjoo Light Metal | Dongwoo Farm vs. LG Chemicals | Dongwoo Farm vs. Hannong Chemicals | Dongwoo Farm vs. Kukil Metal Co |
| Ajusteel vs. Seah Steel Corp | Ajusteel vs. Ni Steel | Ajusteel vs. Korea Steel Co | Ajusteel vs. Bookook Steel |
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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