Correlation Between TOPMATERIAL and Daedong Steel
Can any of the company-specific risk be diversified away by investing in both TOPMATERIAL and Daedong 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 TOPMATERIAL and Daedong Steel into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between TOPMATERIAL LTD and Daedong Steel Co, you can compare the effects of market volatilities on TOPMATERIAL and Daedong 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 TOPMATERIAL with a short position of Daedong Steel. Check out your portfolio center. Please also check ongoing floating volatility patterns of TOPMATERIAL and Daedong Steel.
Diversification Opportunities for TOPMATERIAL and Daedong Steel
0.8 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between TOPMATERIAL and Daedong is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding TOPMATERIAL LTD and Daedong Steel Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Daedong Steel and TOPMATERIAL 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 TOPMATERIAL LTD are associated (or correlated) with Daedong Steel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Daedong Steel has no effect on the direction of TOPMATERIAL i.e., TOPMATERIAL and Daedong Steel go up and down completely randomly.
Pair Corralation between TOPMATERIAL and Daedong Steel
Assuming the 90 days trading horizon TOPMATERIAL LTD is expected to under-perform the Daedong Steel. In addition to that, TOPMATERIAL is 1.46 times more volatile than Daedong Steel Co. It trades about -0.2 of its total potential returns per unit of risk. Daedong Steel Co is currently generating about -0.11 per unit of volatility. If you would invest 400,000 in Daedong Steel Co on September 2, 2024 and sell it today you would lose (52,500) from holding Daedong Steel Co or give up 13.12% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
TOPMATERIAL LTD vs. Daedong Steel Co
Performance |
| Timeline |
| TOPMATERIAL LTD |
| Daedong Steel |
TOPMATERIAL and Daedong Steel Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with TOPMATERIAL and Daedong Steel
The main advantage of trading using opposite TOPMATERIAL and Daedong Steel positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if TOPMATERIAL position performs unexpectedly, Daedong 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 Daedong Steel will offset losses from the drop in Daedong Steel's long position.| TOPMATERIAL vs. Samsung Electronics Co | TOPMATERIAL vs. Samsung Electronics Co | TOPMATERIAL vs. LG Energy Solution | TOPMATERIAL vs. SK Hynix |
| Daedong Steel vs. Keum Kang Steel | Daedong Steel vs. Tplex Co | Daedong Steel vs. Jeil Steel Mfg | Daedong Steel vs. Wonil Special Steel |
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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