Correlation Between Daechang Steel and Sewoon Medical
Can any of the company-specific risk be diversified away by investing in both Daechang Steel and Sewoon Medical 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 Daechang Steel and Sewoon Medical into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Daechang Steel Co and Sewoon Medical Co, you can compare the effects of market volatilities on Daechang Steel and Sewoon Medical 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 Daechang Steel with a short position of Sewoon Medical. Check out your portfolio center. Please also check ongoing floating volatility patterns of Daechang Steel and Sewoon Medical.
Diversification Opportunities for Daechang Steel and Sewoon Medical
0.64 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Daechang and Sewoon is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding Daechang Steel Co and Sewoon Medical Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sewoon Medical and Daechang 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 Daechang Steel Co are associated (or correlated) with Sewoon Medical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sewoon Medical has no effect on the direction of Daechang Steel i.e., Daechang Steel and Sewoon Medical go up and down completely randomly.
Pair Corralation between Daechang Steel and Sewoon Medical
Assuming the 90 days trading horizon Daechang Steel Co is expected to generate 1.17 times more return on investment than Sewoon Medical. However, Daechang Steel is 1.17 times more volatile than Sewoon Medical Co. It trades about 0.04 of its potential returns per unit of risk. Sewoon Medical Co is currently generating about -0.28 per unit of risk. If you would invest 203,500 in Daechang Steel Co on November 5, 2024 and sell it today you would earn a total of 1,500 from holding Daechang Steel Co or generate 0.74% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Daechang Steel Co vs. Sewoon Medical Co
Performance |
| Timeline |
| Daechang Steel |
| Sewoon Medical |
Daechang Steel and Sewoon Medical Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Daechang Steel and Sewoon Medical
The main advantage of trading using opposite Daechang Steel and Sewoon Medical positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Daechang Steel position performs unexpectedly, Sewoon Medical 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 Sewoon Medical will offset losses from the drop in Sewoon Medical's long position.| Daechang Steel vs. Pureun Mutual Savings | Daechang Steel vs. Dgb Financial | Daechang Steel vs. Shinhan Financial Group | Daechang Steel vs. Ecoplastic |
| Sewoon Medical vs. Samsung Electronics Co | Sewoon Medical vs. Samsung Electronics Co | Sewoon Medical vs. KB Financial Group | Sewoon Medical vs. Shinhan Financial Group |
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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.
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