Correlation Between Korea Steel and Korea Refract
Can any of the company-specific risk be diversified away by investing in both Korea Steel and Korea Refract 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 Korea Refract 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 Korea Refract, you can compare the effects of market volatilities on Korea Steel and Korea Refract 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 Korea Refract. Check out your portfolio center. Please also check ongoing floating volatility patterns of Korea Steel and Korea Refract.
Diversification Opportunities for Korea Steel and Korea Refract
0.47 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Korea and Korea is 0.47. Overlapping area represents the amount of risk that can be diversified away by holding Korea Steel Co and Korea Refract in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Korea Refract 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 Korea Refract. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Korea Refract has no effect on the direction of Korea Steel i.e., Korea Steel and Korea Refract go up and down completely randomly.
Pair Corralation between Korea Steel and Korea Refract
Assuming the 90 days trading horizon Korea Steel Co is expected to under-perform the Korea Refract. But the stock apears to be less risky and, when comparing its historical volatility, Korea Steel Co is 1.08 times less risky than Korea Refract. The stock trades about -0.3 of its potential returns per unit of risk. The Korea Refract is currently generating about -0.14 of returns per unit of risk over similar time horizon. If you would invest 224,000 in Korea Refract on September 2, 2024 and sell it today you would lose (12,000) from holding Korea Refract or give up 5.36% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Korea Steel Co vs. Korea Refract
Performance |
| Timeline |
| Korea Steel |
| Korea Refract |
Korea Steel and Korea Refract Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Korea Steel and Korea Refract
The main advantage of trading using opposite Korea Steel and Korea Refract positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Korea Steel position performs unexpectedly, Korea Refract 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 Korea Refract will offset losses from the drop in Korea Refract's long position.The idea behind Korea Steel Co and Korea Refract 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.| Korea Refract vs. Daechang Steel Co | Korea Refract vs. Korea Steel Co | Korea Refract vs. Dongbu Insurance Co | Korea Refract vs. Bookook Steel |
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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.
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