Correlation Between Daejung Chemicals and Dong A
Can any of the company-specific risk be diversified away by investing in both Daejung Chemicals 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 Daejung Chemicals and Dong A into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Daejung Chemicals Metals and Dong A Steel Technology, you can compare the effects of market volatilities on Daejung Chemicals 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 Daejung Chemicals with a short position of Dong A. Check out your portfolio center. Please also check ongoing floating volatility patterns of Daejung Chemicals and Dong A.
Diversification Opportunities for Daejung Chemicals and Dong A
-0.21 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Daejung and Dong is -0.21. Overlapping area represents the amount of risk that can be diversified away by holding Daejung Chemicals Metals 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 Daejung Chemicals 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 Daejung Chemicals Metals 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 Daejung Chemicals i.e., Daejung Chemicals and Dong A go up and down completely randomly.
Pair Corralation between Daejung Chemicals and Dong A
Assuming the 90 days trading horizon Daejung Chemicals Metals is expected to under-perform the Dong A. But the stock apears to be less risky and, when comparing its historical volatility, Daejung Chemicals Metals is 2.13 times less risky than Dong A. The stock trades about -0.06 of its potential returns per unit of risk. The Dong A Steel Technology is currently generating about -0.01 of returns per unit of risk over similar time horizon. If you would invest 437,000 in Dong A Steel Technology on August 24, 2024 and sell it today you would lose (73,500) from holding Dong A Steel Technology or give up 16.82% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Daejung Chemicals Metals vs. Dong A Steel Technology
Performance |
| Timeline |
| Daejung Chemicals Metals |
| Dong A Steel |
Daejung Chemicals and Dong A Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Daejung Chemicals and Dong A
The main advantage of trading using opposite Daejung Chemicals and Dong A positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Daejung Chemicals 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.| Daejung Chemicals vs. LG Chem | Daejung Chemicals vs. Chunbo Co | Daejung Chemicals vs. DukSan Neolux CoLtd | Daejung Chemicals vs. Hyosung Chemical Corp |
| 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.
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