Correlation Between Kumho Industrial and KMH Hitech
Can any of the company-specific risk be diversified away by investing in both Kumho Industrial and KMH Hitech 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 Kumho Industrial and KMH Hitech into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Kumho Industrial Co and KMH Hitech Co, you can compare the effects of market volatilities on Kumho Industrial and KMH Hitech 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 Kumho Industrial with a short position of KMH Hitech. Check out your portfolio center. Please also check ongoing floating volatility patterns of Kumho Industrial and KMH Hitech.
Diversification Opportunities for Kumho Industrial and KMH Hitech
0.82 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Kumho and KMH is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding Kumho Industrial Co and KMH Hitech Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on KMH Hitech and Kumho Industrial 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 Kumho Industrial Co are associated (or correlated) with KMH Hitech. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of KMH Hitech has no effect on the direction of Kumho Industrial i.e., Kumho Industrial and KMH Hitech go up and down completely randomly.
Pair Corralation between Kumho Industrial and KMH Hitech
Assuming the 90 days trading horizon Kumho Industrial Co is expected to under-perform the KMH Hitech. But the stock apears to be less risky and, when comparing its historical volatility, Kumho Industrial Co is 1.29 times less risky than KMH Hitech. The stock trades about -0.11 of its potential returns per unit of risk. The KMH Hitech Co is currently generating about -0.04 of returns per unit of risk over similar time horizon. If you would invest 117,700 in KMH Hitech Co on September 12, 2024 and sell it today you would lose (36,500) from holding KMH Hitech Co or give up 31.01% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Kumho Industrial Co vs. KMH Hitech Co
Performance |
| Timeline |
| Kumho Industrial |
| KMH Hitech |
Kumho Industrial and KMH Hitech Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Kumho Industrial and KMH Hitech
The main advantage of trading using opposite Kumho Industrial and KMH Hitech positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Kumho Industrial position performs unexpectedly, KMH Hitech 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 KMH Hitech will offset losses from the drop in KMH Hitech's long position.| Kumho Industrial vs. Samsung Electronics Co | Kumho Industrial vs. Samsung Electronics Co | Kumho Industrial vs. SK Hynix | Kumho Industrial vs. POSCO Holdings |
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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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.
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