Correlation Between Korea Computer and Daehan Steel
Can any of the company-specific risk be diversified away by investing in both Korea Computer and Daehan Steel 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 Korea Computer and Daehan Steel into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Korea Computer Systems and Daehan Steel, you can compare the effects of market volatilities on Korea Computer and Daehan Steel 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 Korea Computer with a short position of Daehan Steel. Check out your portfolio center. Please also check ongoing floating volatility patterns of Korea Computer and Daehan Steel.
Diversification Opportunities for Korea Computer and Daehan Steel
0.72 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Korea and Daehan is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding Korea Computer Systems and Daehan Steel in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Daehan Steel and Korea Computer 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 Korea Computer Systems are associated (or correlated) with Daehan Steel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Daehan Steel has no effect on the direction of Korea Computer i.e., Korea Computer and Daehan Steel go up and down completely randomly.
Pair Corralation between Korea Computer and Daehan Steel
Assuming the 90 days trading horizon Korea Computer Systems is expected to under-perform the Daehan Steel. In addition to that, Korea Computer is 7.52 times more volatile than Daehan Steel. It trades about -0.24 of its total potential returns per unit of risk. Daehan Steel is currently generating about 0.07 per unit of volatility. If you would invest 1,641,000 in Daehan Steel on November 5, 2024 and sell it today you would earn a total of 16,000 from holding Daehan Steel or generate 0.98% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Korea Computer Systems vs. Daehan Steel
Performance |
| Timeline |
| Korea Computer Systems |
| Daehan Steel |
Korea Computer and Daehan Steel Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Korea Computer and Daehan Steel
The main advantage of trading using opposite Korea Computer and Daehan Steel positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Korea Computer position performs unexpectedly, Daehan Steel 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 Daehan Steel will offset losses from the drop in Daehan Steel's long position.| Korea Computer vs. Settlebank | Korea Computer vs. Cafe24 Corp | Korea Computer vs. Daishin Information Communications | Korea Computer vs. SSR Inc |
| Daehan Steel vs. Aprogen Healthcare Games | Daehan Steel vs. Netmarble Games Corp | Daehan Steel vs. Kg Chemical | Daehan Steel vs. KPX Green Chemical |
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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.
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