Correlation Between Daehan Steel and InfoBank

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

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

Diversification Opportunities for Daehan Steel and InfoBank

0.64

Correlation Coefficient

Daehan Steel  InfoBank

Poor diversification

The 3 months correlation between Daehan and InfoBank is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding Daehan Steel and InfoBank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on InfoBank and Daehan 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 Daehan Steel are associated (or correlated) with InfoBank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of InfoBank has no effect on the direction of Daehan Steel i.e., Daehan Steel and InfoBank go up and down completely randomly.

Pair Corralation between Daehan Steel and InfoBank

Assuming the 90 days trading horizon Daehan Steel is expected to generate 2.09 times less return on investment than InfoBank. But when comparing it to its historical volatility, Daehan Steel is 6.54 times less risky than InfoBank. It trades about 0.35 of its potential returns per unit of risk. InfoBank is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  679,385  in InfoBank on September 30, 2024 and sell it today you would earn a total of  79,615  from holding InfoBank or generate 11.72% return on investment over 90 days.

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

Daehan Steel  vs.  InfoBank

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.

InfoBank

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in InfoBank are ranked lower than 5 (%) 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.

Pair Trading with Daehan Steel and InfoBank

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

The idea behind Daehan Steel and InfoBank 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.