Correlation Between Jeju Beer and Dongkuk Steel
Can any of the company-specific risk be diversified away by investing in both Jeju Beer and Dongkuk 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 Jeju Beer and Dongkuk Steel into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Jeju Beer Co and Dongkuk Steel Mill, you can compare the effects of market volatilities on Jeju Beer and Dongkuk 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 Jeju Beer with a short position of Dongkuk Steel. Check out your portfolio center. Please also check ongoing floating volatility patterns of Jeju Beer and Dongkuk Steel.
Diversification Opportunities for Jeju Beer and Dongkuk Steel
0.53 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Jeju and Dongkuk is 0.53. Overlapping area represents the amount of risk that can be diversified away by holding Jeju Beer Co and Dongkuk Steel Mill in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dongkuk Steel Mill and Jeju Beer 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 Jeju Beer Co are associated (or correlated) with Dongkuk Steel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dongkuk Steel Mill has no effect on the direction of Jeju Beer i.e., Jeju Beer and Dongkuk Steel go up and down completely randomly.
Pair Corralation between Jeju Beer and Dongkuk Steel
Assuming the 90 days trading horizon Jeju Beer Co is expected to generate 2.92 times more return on investment than Dongkuk Steel. However, Jeju Beer is 2.92 times more volatile than Dongkuk Steel Mill. It trades about 0.21 of its potential returns per unit of risk. Dongkuk Steel Mill is currently generating about 0.24 per unit of risk. If you would invest 236,500 in Jeju Beer Co on November 27, 2024 and sell it today you would earn a total of 33,500 from holding Jeju Beer Co or generate 14.16% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Jeju Beer Co vs. Dongkuk Steel Mill
Performance |
| Timeline |
| Jeju Beer |
| Dongkuk Steel Mill |
Jeju Beer and Dongkuk Steel Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Jeju Beer and Dongkuk Steel
The main advantage of trading using opposite Jeju Beer and Dongkuk Steel positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Jeju Beer position performs unexpectedly, Dongkuk 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 Dongkuk Steel will offset losses from the drop in Dongkuk Steel's long position.| Jeju Beer vs. Shinhan Inverse Copper | Jeju Beer vs. Youngsin Metal Industrial | Jeju Beer vs. PJ Metal Co | Jeju Beer vs. Daiyang Metal Co |
| Dongkuk Steel vs. Korea Steel Co | Dongkuk Steel vs. Wonil Special Steel | Dongkuk Steel vs. BooKook Steel Co | Dongkuk Steel vs. GS Retail 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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.
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