Correlation Between Formetal and Duksan Hi

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

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

Diversification Opportunities for Formetal and Duksan Hi

0.41

Correlation Coefficient

Formetal  Duksan Hi

Very weak diversification

The 3 months correlation between Formetal and Duksan is 0.41. Overlapping area represents the amount of risk that can be diversified away by holding Formetal Co and Duksan Hi Metal in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Duksan Hi Metal and Formetal 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 Formetal Co are associated (or correlated) with Duksan Hi. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Duksan Hi Metal has no effect on the direction of Formetal i.e., Formetal and Duksan Hi go up and down completely randomly.

Pair Corralation between Formetal and Duksan Hi

Assuming the 90 days trading horizon Formetal Co is expected to generate 0.66 times more return on investment than Duksan Hi. However, Formetal Co is 1.52 times less risky than Duksan Hi. It trades about -0.05 of its potential returns per unit of risk. Duksan Hi Metal is currently generating about -0.18 per unit of risk. If you would invest  265,500  in Formetal Co on September 5, 2024 and sell it today you would lose (14,500) from holding Formetal Co or give up 5.46% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.31%
Values	Daily Returns

Formetal Co  vs.  Duksan Hi Metal

Formetal

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Formetal Co has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Formetal is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Duksan Hi Metal

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Duksan Hi Metal 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.

Pair Trading with Formetal and Duksan Hi

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

The idea behind Formetal Co and Duksan Hi Metal 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.