Correlation Between Korea Steel and Dream Security

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

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

Diversification Opportunities for Korea Steel and Dream Security

0.17

Correlation Coefficient

Korea Steel  Dream Security

Average diversification

The 3 months correlation between Korea and Dream is 0.17. Overlapping area represents the amount of risk that can be diversified away by holding Korea Steel Co and Dream Security co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dream Security co and Korea 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 Korea Steel Co are associated (or correlated) with Dream Security. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dream Security co has no effect on the direction of Korea Steel i.e., Korea Steel and Dream Security go up and down completely randomly.

Pair Corralation between Korea Steel and Dream Security

Assuming the 90 days trading horizon Korea Steel Co is expected to generate 0.71 times more return on investment than Dream Security. However, Korea Steel Co is 1.41 times less risky than Dream Security. It trades about 0.08 of its potential returns per unit of risk. Dream Security co is currently generating about 0.04 per unit of risk. If you would invest  152,400  in Korea Steel Co on September 27, 2024 and sell it today you would earn a total of  16,400  from holding Korea Steel Co or generate 10.76% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	98.39%
Values	Daily Returns

Korea Steel Co  vs.  Dream Security co

Korea Steel

Risk-Adjusted Performance

6 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Korea Steel Co are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Korea Steel may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Dream Security co

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Dream Security co are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Dream Security may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Korea Steel and Dream Security

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

The idea behind Korea Steel Co and Dream Security 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.