Correlation Between Dong Il and J Steel

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

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

Diversification Opportunities for Dong Il and J Steel

-0.65

Correlation Coefficient

Dong Il  J Steel

Excellent diversification

The 3 months correlation between Dong and 023440 is -0.65. Overlapping area represents the amount of risk that can be diversified away by holding Dong Il Steel and J Steel Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on J Steel and Dong Il 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 Dong Il Steel are associated (or correlated) with J Steel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of J Steel has no effect on the direction of Dong Il i.e., Dong Il and J Steel go up and down completely randomly.

Pair Corralation between Dong Il and J Steel

Assuming the 90 days trading horizon Dong Il is expected to generate 18.57 times less return on investment than J Steel. But when comparing it to its historical volatility, Dong Il Steel is 1.93 times less risky than J Steel. It trades about 0.01 of its potential returns per unit of risk. J Steel Co is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  177,300  in J Steel Co on September 17, 2024 and sell it today you would earn a total of  9,500  from holding J Steel Co or generate 5.36% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	95.45%
Values	Daily Returns

Dong Il Steel  vs.  J Steel Co

Dong Il Steel

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Dong Il Steel 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.

J Steel

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in J Steel Co are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, J Steel sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Dong Il and J Steel

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

The idea behind Dong Il Steel and J Steel Co 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.