Correlation Between Daehan Steel and Total Soft

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

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

Diversification Opportunities for Daehan Steel and Total Soft

0.65

Correlation Coefficient

Daehan Steel  Total Soft

Poor diversification

The 3 months correlation between Daehan and Total is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding Daehan Steel and Total Soft Bank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Total Soft Bank 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 Total Soft. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Total Soft Bank has no effect on the direction of Daehan Steel i.e., Daehan Steel and Total Soft go up and down completely randomly.

Pair Corralation between Daehan Steel and Total Soft

Assuming the 90 days trading horizon Daehan Steel is expected to generate 3.33 times less return on investment than Total Soft. But when comparing it to its historical volatility, Daehan Steel is 4.74 times less risky than Total Soft. It trades about 0.22 of its potential returns per unit of risk. Total Soft Bank is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest  481,000  in Total Soft Bank on September 23, 2024 and sell it today you would earn a total of  401,000  from holding Total Soft Bank or generate 83.37% 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.  Total Soft Bank

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.

Total Soft Bank

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Total Soft Bank are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Total Soft sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Daehan Steel and Total Soft

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

The idea behind Daehan Steel and Total Soft Bank 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.