Correlation Between Daechang Steel and Microfriend
Can any of the company-specific risk be diversified away by investing in both Daechang Steel and Microfriend 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 Microfriend 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 Microfriend, you can compare the effects of market volatilities on Daechang Steel and Microfriend 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 Microfriend. Check out your portfolio center. Please also check ongoing floating volatility patterns of Daechang Steel and Microfriend.
Diversification Opportunities for Daechang Steel and Microfriend
0.61 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Daechang and Microfriend is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding Daechang Steel Co and Microfriend in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Microfriend 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 Microfriend. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Microfriend has no effect on the direction of Daechang Steel i.e., Daechang Steel and Microfriend go up and down completely randomly.
Pair Corralation between Daechang Steel and Microfriend
Assuming the 90 days trading horizon Daechang Steel Co is expected to generate 0.64 times more return on investment than Microfriend. However, Daechang Steel Co is 1.55 times less risky than Microfriend. It trades about 0.35 of its potential returns per unit of risk. Microfriend is currently generating about 0.12 per unit of risk. If you would invest 189,169 in Daechang Steel Co on October 12, 2024 and sell it today you would earn a total of 20,831 from holding Daechang Steel Co or generate 11.01% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 95.0% |
| Values | Daily Returns |
Daechang Steel Co vs. Microfriend
Performance |
| Timeline |
| Daechang Steel |
| Microfriend |
Daechang Steel and Microfriend Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Daechang Steel and Microfriend
The main advantage of trading using opposite Daechang Steel and Microfriend positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Daechang Steel position performs unexpectedly, Microfriend 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 Microfriend will offset losses from the drop in Microfriend's long position.| Daechang Steel vs. Hwangkum Steel Technology | Daechang Steel vs. Industrial Bank | Daechang Steel vs. Clean Science co | Daechang Steel vs. NewFlex Technology Co |
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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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.
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