Correlation Between Dongil Steel and Grand Korea

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

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

Diversification Opportunities for Dongil Steel and Grand Korea

0.3

Correlation Coefficient

Dongil Steel  Grand Korea

Weak diversification

The 3 months correlation between Dongil and Grand is 0.3. Overlapping area represents the amount of risk that can be diversified away by holding Dongil Steel Co and Grand Korea Leisure in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Grand Korea Leisure and Dongil 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 Dongil Steel Co are associated (or correlated) with Grand Korea. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Grand Korea Leisure has no effect on the direction of Dongil Steel i.e., Dongil Steel and Grand Korea go up and down completely randomly.

Pair Corralation between Dongil Steel and Grand Korea

Assuming the 90 days trading horizon Dongil Steel Co is expected to under-perform the Grand Korea. But the stock apears to be less risky and, when comparing its historical volatility, Dongil Steel Co is 1.26 times less risky than Grand Korea. The stock trades about -0.16 of its potential returns per unit of risk. The Grand Korea Leisure is currently generating about -0.04 of returns per unit of risk over similar time horizon. If you would invest  1,156,000  in Grand Korea Leisure on September 12, 2024 and sell it today you would lose (63,000) from holding Grand Korea Leisure or give up 5.45% of portfolio value over 90 days.

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

Dongil Steel Co  vs.  Grand Korea Leisure

Dongil Steel

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Dongil Steel Co has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Grand Korea Leisure

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Grand Korea Leisure has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Grand Korea is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Dongil Steel and Grand Korea

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

The idea behind Dongil Steel Co and Grand Korea Leisure 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.