Correlation Between Korea Petro and RF Materials
Can any of the company-specific risk be diversified away by investing in both Korea Petro and RF Materials 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 RF Materials 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 RF Materials Co, you can compare the effects of market volatilities on Korea Petro and RF Materials 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 RF Materials. Check out your portfolio center. Please also check ongoing floating volatility patterns of Korea Petro and RF Materials.
Diversification Opportunities for Korea Petro and RF Materials
0.22 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Korea and 327260 is 0.22. Overlapping area represents the amount of risk that can be diversified away by holding Korea Petro Chemical and RF Materials Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on RF Materials 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 RF Materials. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of RF Materials has no effect on the direction of Korea Petro i.e., Korea Petro and RF Materials go up and down completely randomly.
Pair Corralation between Korea Petro and RF Materials
Assuming the 90 days trading horizon Korea Petro Chemical is expected to generate 0.55 times more return on investment than RF Materials. However, Korea Petro Chemical is 1.81 times less risky than RF Materials. It trades about -0.31 of its potential returns per unit of risk. RF Materials Co is currently generating about -0.21 per unit of risk. If you would invest 10,540,000 in Korea Petro Chemical on August 28, 2024 and sell it today you would lose (1,690,000) from holding Korea Petro Chemical or give up 16.03% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Korea Petro Chemical vs. RF Materials Co
Performance |
| Timeline |
| Korea Petro Chemical |
| RF Materials |
Korea Petro and RF Materials Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Korea Petro and RF Materials
The main advantage of trading using opposite Korea Petro and RF Materials positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Korea Petro position performs unexpectedly, RF Materials 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 RF Materials will offset losses from the drop in RF Materials' long position.| Korea Petro vs. LG Chemicals | Korea Petro vs. Lotte Chemical Corp | Korea Petro vs. Hyundai Steel | Korea Petro vs. Seah Steel Corp |
| RF Materials vs. CU Medical Systems | RF Materials vs. Grand Korea Leisure | RF Materials vs. TOPMATERIAL LTD | RF Materials vs. Ecoplastic |
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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.
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