Correlation Between Seah Steel and Dong Il
Can any of the company-specific risk be diversified away by investing in both Seah Steel and Dong Il 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 Seah Steel and Dong Il into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Seah Steel Corp and Dong Il Steel, you can compare the effects of market volatilities on Seah Steel and Dong Il 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 Seah Steel with a short position of Dong Il. Check out your portfolio center. Please also check ongoing floating volatility patterns of Seah Steel and Dong Il.
Diversification Opportunities for Seah Steel and Dong Il
-0.33 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Seah and Dong is -0.33. Overlapping area represents the amount of risk that can be diversified away by holding Seah Steel Corp and Dong Il Steel in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dong Il Steel and Seah 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 Seah Steel Corp are associated (or correlated) with Dong Il. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dong Il Steel has no effect on the direction of Seah Steel i.e., Seah Steel and Dong Il go up and down completely randomly.
Pair Corralation between Seah Steel and Dong Il
Assuming the 90 days trading horizon Seah Steel Corp is expected to generate 2.03 times more return on investment than Dong Il. However, Seah Steel is 2.03 times more volatile than Dong Il Steel. It trades about 0.32 of its potential returns per unit of risk. Dong Il Steel is currently generating about -0.15 per unit of risk. If you would invest 12,110,000 in Seah Steel Corp on October 23, 2024 and sell it today you would earn a total of 1,990,000 from holding Seah Steel Corp or generate 16.43% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Seah Steel Corp vs. Dong Il Steel
Performance |
| Timeline |
| Seah Steel Corp |
| Dong Il Steel |
Seah Steel and Dong Il Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Seah Steel and Dong Il
The main advantage of trading using opposite Seah Steel and Dong Il positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Seah Steel position performs unexpectedly, Dong Il 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 Dong Il will offset losses from the drop in Dong Il's long position.| Seah Steel vs. Korea Industrial Co | Seah Steel vs. BNK Financial Group | Seah Steel vs. Korean Reinsurance Co | Seah Steel vs. LG Chemicals |
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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.
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