Correlation Between Finebesteel and Daehan Steel
Can any of the company-specific risk be diversified away by investing in both Finebesteel 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 Finebesteel and Daehan Steel into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Finebesteel and Daehan Steel, you can compare the effects of market volatilities on Finebesteel 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 Finebesteel with a short position of Daehan Steel. Check out your portfolio center. Please also check ongoing floating volatility patterns of Finebesteel and Daehan Steel.
Diversification Opportunities for Finebesteel and Daehan Steel
0.17 | Correlation Coefficient |
Average diversification
The 3 months correlation between Finebesteel and Daehan is 0.17. Overlapping area represents the amount of risk that can be diversified away by holding Finebesteel and Daehan Steel in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Daehan Steel and Finebesteel 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 Finebesteel 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 Finebesteel i.e., Finebesteel and Daehan Steel go up and down completely randomly.
Pair Corralation between Finebesteel and Daehan Steel
Assuming the 90 days trading horizon Finebesteel is expected to generate 1.74 times more return on investment than Daehan Steel. However, Finebesteel is 1.74 times more volatile than Daehan Steel. It trades about 0.03 of its potential returns per unit of risk. Daehan Steel is currently generating about 0.05 per unit of risk. If you would invest 100,000 in Finebesteel on August 27, 2024 and sell it today you would earn a total of 8,200 from holding Finebesteel or generate 8.2% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Finebesteel vs. Daehan Steel
Performance |
| Timeline |
| Finebesteel |
| Daehan Steel |
Finebesteel and Daehan Steel Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Finebesteel and Daehan Steel
The main advantage of trading using opposite Finebesteel and Daehan Steel positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Finebesteel 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.The idea behind Finebesteel and Daehan Steel pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.| Daehan Steel vs. LG Chemicals | Daehan Steel vs. Lotte Chemical Corp | Daehan Steel vs. Hyundai Steel | Daehan Steel vs. Seah Steel Corp |
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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.
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