Correlation Between Korea Steel and PJ Electronics
Can any of the company-specific risk be diversified away by investing in both Korea Steel and PJ Electronics 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 Steel and PJ Electronics into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Korea Steel Co and PJ Electronics Co, you can compare the effects of market volatilities on Korea Steel and PJ Electronics 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 Steel with a short position of PJ Electronics. Check out your portfolio center. Please also check ongoing floating volatility patterns of Korea Steel and PJ Electronics.
Diversification Opportunities for Korea Steel and PJ Electronics
0.61 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Korea and 006140 is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding Korea Steel Co and PJ Electronics Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PJ Electronics and Korea Steel 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 Steel Co are associated (or correlated) with PJ Electronics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PJ Electronics has no effect on the direction of Korea Steel i.e., Korea Steel and PJ Electronics go up and down completely randomly.
Pair Corralation between Korea Steel and PJ Electronics
Assuming the 90 days trading horizon Korea Steel Co is expected to generate 0.7 times more return on investment than PJ Electronics. However, Korea Steel Co is 1.43 times less risky than PJ Electronics. It trades about -0.07 of its potential returns per unit of risk. PJ Electronics Co is currently generating about -0.13 per unit of risk. If you would invest 153,500 in Korea Steel Co on September 3, 2024 and sell it today you would lose (12,700) from holding Korea Steel Co or give up 8.27% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Korea Steel Co vs. PJ Electronics Co
Performance |
| Timeline |
| Korea Steel |
| PJ Electronics |
Korea Steel and PJ Electronics Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Korea Steel and PJ Electronics
The main advantage of trading using opposite Korea Steel and PJ Electronics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Korea Steel position performs unexpectedly, PJ Electronics 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 PJ Electronics will offset losses from the drop in PJ Electronics' long position.| Korea Steel vs. Top Material Co | Korea Steel vs. PI Advanced Materials | Korea Steel vs. Hanjin Transportation Co | Korea Steel vs. Hanmi Semiconductor Co |
| PJ Electronics vs. Daejoo Electronic Materials | PJ Electronics vs. Parksystems Corp | PJ Electronics vs. BH Co | PJ Electronics vs. Partron Co |
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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..
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