Correlation Between InfoBank and Daehan Steel

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

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

Diversification Opportunities for InfoBank and Daehan Steel

0.58

Correlation Coefficient

InfoBank  Daehan Steel

Very weak diversification

The 3 months correlation between InfoBank and Daehan is 0.58. Overlapping area represents the amount of risk that can be diversified away by holding InfoBank and Daehan Steel in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Daehan Steel and InfoBank 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 InfoBank are associated (or correlated) with Daehan Steel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Daehan Steel has no effect on the direction of InfoBank i.e., InfoBank and Daehan Steel go up and down completely randomly.

Pair Corralation between InfoBank and Daehan Steel

Assuming the 90 days trading horizon InfoBank is expected to generate 1.11 times less return on investment than Daehan Steel. In addition to that, InfoBank is 2.6 times more volatile than Daehan Steel. It trades about 0.08 of its total potential returns per unit of risk. Daehan Steel is currently generating about 0.22 per unit of volatility. If you would invest  1,303,000  in Daehan Steel on September 25, 2024 and sell it today you would earn a total of  358,000  from holding Daehan Steel or generate 27.48% return on investment over 90 days.

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

InfoBank  vs.  Daehan Steel

InfoBank

Risk-Adjusted Performance

6 of 100

Modest

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

Daehan Steel

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Daehan Steel are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Daehan Steel sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with InfoBank and Daehan Steel

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

The idea behind InfoBank and Daehan Steel 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.