Correlation Between Dongil Metal and Korea Information

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

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

Diversification Opportunities for Dongil Metal and Korea Information

0.79

Correlation Coefficient

Dongil Metal  Korea Information

Poor diversification

The 3 months correlation between Dongil and Korea is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding Dongil Metal Co and Korea Information Communicatio in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Korea Information and Dongil Metal 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 Metal Co 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 Dongil Metal i.e., Dongil Metal and Korea Information go up and down completely randomly.

Pair Corralation between Dongil Metal and Korea Information

Assuming the 90 days trading horizon Dongil Metal Co is expected to under-perform the Korea Information. But the stock apears to be less risky and, when comparing its historical volatility, Dongil Metal Co is 1.41 times less risky than Korea Information. The stock trades about -0.23 of its potential returns per unit of risk. The Korea Information Communications is currently generating about -0.07 of returns per unit of risk over similar time horizon. If you would invest  837,000  in Korea Information Communications on September 22, 2024 and sell it today you would lose (55,000) from holding Korea Information Communications or give up 6.57% of portfolio value over 90 days.

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

Dongil Metal Co  vs.  Korea Information Communicatio

Dongil Metal

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Dongil Metal 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.

Korea Information

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Korea Information Communications has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Dongil Metal and Korea Information

The main advantage of trading using opposite Dongil Metal and Korea Information positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dongil Metal 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 Dongil Metal Co and Korea Information Communications 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.