Correlation Between LB Investment and Dong A
Can any of the company-specific risk be diversified away by investing in both LB Investment and Dong A 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 LB Investment and Dong A into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between LB Investment and Dong A Steel Technology, you can compare the effects of market volatilities on LB Investment and Dong A 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 LB Investment with a short position of Dong A. Check out your portfolio center. Please also check ongoing floating volatility patterns of LB Investment and Dong A.
Diversification Opportunities for LB Investment and Dong A
0.65 | Correlation Coefficient |
Poor diversification
The 3 months correlation between 309960 and Dong is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding LB Investment and Dong A Steel Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dong A Steel and LB Investment 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 LB Investment are associated (or correlated) with Dong A. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dong A Steel has no effect on the direction of LB Investment i.e., LB Investment and Dong A go up and down completely randomly.
Pair Corralation between LB Investment and Dong A
Assuming the 90 days trading horizon LB Investment is expected to under-perform the Dong A. But the stock apears to be less risky and, when comparing its historical volatility, LB Investment is 1.72 times less risky than Dong A. The stock trades about -0.26 of its potential returns per unit of risk. The Dong A Steel Technology is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest 297,000 in Dong A Steel Technology on November 5, 2024 and sell it today you would earn a total of 6,500 from holding Dong A Steel Technology or generate 2.19% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
LB Investment vs. Dong A Steel Technology
Performance |
| Timeline |
| LB Investment |
| Dong A Steel |
LB Investment and Dong A Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with LB Investment and Dong A
The main advantage of trading using opposite LB Investment and Dong A positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if LB Investment position performs unexpectedly, Dong A 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 A will offset losses from the drop in Dong A's long position.| LB Investment vs. Samsung Electronics Co | LB Investment vs. Samsung Electronics Co | LB Investment vs. LG Energy Solution | LB Investment vs. SK Hynix |
| Dong A vs. Jeju Beer Co | Dong A vs. Daeduck Electronics Co | Dong A vs. Hankook Furniture Co | Dong A vs. Sangsin Energy Display |
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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.
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