Correlation Between Daechang Steel and Raontech
Can any of the company-specific risk be diversified away by investing in both Daechang Steel and Raontech 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 Raontech 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 Raontech, you can compare the effects of market volatilities on Daechang Steel and Raontech 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 Raontech. Check out your portfolio center. Please also check ongoing floating volatility patterns of Daechang Steel and Raontech.
Diversification Opportunities for Daechang Steel and Raontech
0.66 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Daechang and Raontech is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding Daechang Steel Co and Raontech in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Raontech 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 Raontech. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Raontech has no effect on the direction of Daechang Steel i.e., Daechang Steel and Raontech go up and down completely randomly.
Pair Corralation between Daechang Steel and Raontech
Assuming the 90 days trading horizon Daechang Steel Co is expected to generate 0.58 times more return on investment than Raontech. However, Daechang Steel Co is 1.72 times less risky than Raontech. It trades about -0.08 of its potential returns per unit of risk. Raontech is currently generating about -0.15 per unit of risk. If you would invest 272,500 in Daechang Steel Co on September 3, 2024 and sell it today you would lose (48,500) from holding Daechang Steel Co or give up 17.8% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Daechang Steel Co vs. Raontech
Performance |
| Timeline |
| Daechang Steel |
| Raontech |
Daechang Steel and Raontech Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Daechang Steel and Raontech
The main advantage of trading using opposite Daechang Steel and Raontech positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Daechang Steel position performs unexpectedly, Raontech 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 Raontech will offset losses from the drop in Raontech's long position.| Daechang Steel vs. LG Chemicals | Daechang Steel vs. POSCO Holdings | Daechang Steel vs. Hanwha Solutions | Daechang Steel vs. Lotte Chemical Corp |
| Raontech vs. Daiyang Metal Co | Raontech vs. SEOJEON ELECTRIC MACHINERY | Raontech vs. Hanjoo Light Metal | Raontech vs. Kbi Metal Co |
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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.
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