Correlation Between Korea Petro and Homecast CoLtd
Can any of the company-specific risk be diversified away by investing in both Korea Petro and Homecast CoLtd 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 Korea Petro and Homecast CoLtd into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Korea Petro Chemical and Homecast CoLtd, you can compare the effects of market volatilities on Korea Petro and Homecast CoLtd 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 Korea Petro with a short position of Homecast CoLtd. Check out your portfolio center. Please also check ongoing floating volatility patterns of Korea Petro and Homecast CoLtd.
Diversification Opportunities for Korea Petro and Homecast CoLtd
0.72 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Korea and Homecast is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding Korea Petro Chemical and Homecast CoLtd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Homecast CoLtd and Korea Petro 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 Korea Petro Chemical are associated (or correlated) with Homecast CoLtd. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Homecast CoLtd has no effect on the direction of Korea Petro i.e., Korea Petro and Homecast CoLtd go up and down completely randomly.
Pair Corralation between Korea Petro and Homecast CoLtd
Assuming the 90 days trading horizon Korea Petro Chemical is expected to under-perform the Homecast CoLtd. But the stock apears to be less risky and, when comparing its historical volatility, Korea Petro Chemical is 1.2 times less risky than Homecast CoLtd. The stock trades about -0.46 of its potential returns per unit of risk. The Homecast CoLtd is currently generating about -0.05 of returns per unit of risk over similar time horizon. If you would invest 263,000 in Homecast CoLtd on September 2, 2024 and sell it today you would lose (11,500) from holding Homecast CoLtd or give up 4.37% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Korea Petro Chemical vs. Homecast CoLtd
Performance |
| Timeline |
| Korea Petro Chemical |
| Homecast CoLtd |
Korea Petro and Homecast CoLtd Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Korea Petro and Homecast CoLtd
The main advantage of trading using opposite Korea Petro and Homecast CoLtd positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Korea Petro position performs unexpectedly, Homecast CoLtd 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 Homecast CoLtd will offset losses from the drop in Homecast CoLtd's long position.| Korea Petro vs. LG Chemicals | Korea Petro vs. POSCO Holdings | Korea Petro vs. Hanwha Solutions | Korea Petro vs. Hyundai Steel |
| Homecast CoLtd vs. Dongsin Engineering Construction | Homecast CoLtd vs. Doosan Fuel Cell | Homecast CoLtd vs. Daishin Balance 1 | Homecast CoLtd vs. Total Soft Bank |
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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