Correlation Between Dongkuk Structures and Korea Information

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

By analyzing existing cross correlation between Dongkuk Structures Construction and Korea Information Engineering, you can compare the effects of market volatilities on Dongkuk Structures and Korea Information 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 Dongkuk Structures with a short position of Korea Information. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dongkuk Structures and Korea Information.

Diversification Opportunities for Dongkuk Structures and Korea Information

0.45

Correlation Coefficient

Dongkuk Structures  Korea Information

Very weak diversification

The 3 months correlation between Dongkuk and Korea is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding Dongkuk Structures Constructio and Korea Information Engineering in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Korea Information and Dongkuk Structures 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 Dongkuk Structures Construction are associated (or correlated) with Korea Information. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Korea Information has no effect on the direction of Dongkuk Structures i.e., Dongkuk Structures and Korea Information go up and down completely randomly.

Pair Corralation between Dongkuk Structures and Korea Information

Assuming the 90 days trading horizon Dongkuk Structures Construction is expected to under-perform the Korea Information. In addition to that, Dongkuk Structures is 1.35 times more volatile than Korea Information Engineering. It trades about -0.08 of its total potential returns per unit of risk. Korea Information Engineering is currently generating about 0.02 per unit of volatility. If you would invest  255,000  in Korea Information Engineering on September 20, 2024 and sell it today you would earn a total of  4,000  from holding Korea Information Engineering or generate 1.57% return on investment over 90 days.

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

Dongkuk Structures Constructio  vs.  Korea Information Engineering

Dongkuk Structures

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Dongkuk Structures Construction 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.

Korea Information

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Korea Information Engineering are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Korea Information is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Dongkuk Structures and Korea Information

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

The idea behind Dongkuk Structures Construction and Korea Information Engineering 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.