Correlation Between Husteel and Dongsin Engineering

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

By analyzing existing cross correlation between Husteel and Dongsin Engineering Construction, you can compare the effects of market volatilities on Husteel and Dongsin Engineering 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 Husteel with a short position of Dongsin Engineering. Check out your portfolio center. Please also check ongoing floating volatility patterns of Husteel and Dongsin Engineering.

Diversification Opportunities for Husteel and Dongsin Engineering

-0.57

Correlation Coefficient

Husteel  Dongsin Engineering

Excellent diversification

The 3 months correlation between Husteel and Dongsin is -0.57. Overlapping area represents the amount of risk that can be diversified away by holding Husteel and Dongsin Engineering Constructi in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dongsin Engineering and Husteel 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 Husteel are associated (or correlated) with Dongsin Engineering. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dongsin Engineering has no effect on the direction of Husteel i.e., Husteel and Dongsin Engineering go up and down completely randomly.

Pair Corralation between Husteel and Dongsin Engineering

Assuming the 90 days trading horizon Husteel is expected to under-perform the Dongsin Engineering. But the stock apears to be less risky and, when comparing its historical volatility, Husteel is 5.06 times less risky than Dongsin Engineering. The stock trades about -0.05 of its potential returns per unit of risk. The Dongsin Engineering Construction is currently generating about 0.25 of returns per unit of risk over similar time horizon. If you would invest  2,045,000  in Dongsin Engineering Construction on September 13, 2024 and sell it today you would earn a total of  4,535,000  from holding Dongsin Engineering Construction or generate 221.76% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Husteel  vs.  Dongsin Engineering Constructi

Husteel

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Husteel 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.

Dongsin Engineering

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Dongsin Engineering Construction are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Dongsin Engineering sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Husteel and Dongsin Engineering

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

The idea behind Husteel and Dongsin Engineering Construction 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.

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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.