Correlation Between Dongkuk Steel and SeAH Bestee

Can any of the company-specific risk be diversified away by investing in both Dongkuk Steel and SeAH Bestee 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 Dongkuk Steel and SeAH Bestee into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Dongkuk Steel Mill and SeAH Bestee, you can compare the effects of market volatilities on Dongkuk Steel and SeAH Bestee 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 Dongkuk Steel with a short position of SeAH Bestee. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dongkuk Steel and SeAH Bestee.

Diversification Opportunities for Dongkuk Steel and SeAH Bestee

-0.54

Correlation Coefficient

Dongkuk Steel  SeAH Bestee

Excellent diversification

The 3 months correlation between Dongkuk and SeAH is -0.54. Overlapping area represents the amount of risk that can be diversified away by holding Dongkuk Steel Mill and SeAH Bestee in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SeAH Bestee and Dongkuk 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 Dongkuk Steel Mill are associated (or correlated) with SeAH Bestee. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SeAH Bestee has no effect on the direction of Dongkuk Steel i.e., Dongkuk Steel and SeAH Bestee go up and down completely randomly.

Pair Corralation between Dongkuk Steel and SeAH Bestee

Assuming the 90 days trading horizon Dongkuk Steel Mill is expected to under-perform the SeAH Bestee. But the stock apears to be less risky and, when comparing its historical volatility, Dongkuk Steel Mill is 3.67 times less risky than SeAH Bestee. The stock trades about -0.11 of its potential returns per unit of risk. The SeAH Bestee is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  1,979,000  in SeAH Bestee on August 31, 2024 and sell it today you would earn a total of  321,000  from holding SeAH Bestee or generate 16.22% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	98.31%
Values	Daily Returns

Dongkuk Steel Mill  vs.  SeAH Bestee

Dongkuk Steel Mill

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Dongkuk Steel Mill has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

SeAH Bestee

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in SeAH Bestee are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, SeAH Bestee sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Dongkuk Steel and SeAH Bestee

The main advantage of trading using opposite Dongkuk Steel and SeAH Bestee positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dongkuk Steel position performs unexpectedly, SeAH Bestee 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 SeAH Bestee will offset losses from the drop in SeAH Bestee's long position.

The idea behind Dongkuk Steel Mill and SeAH Bestee pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.