Correlation Between Korea Steel and Korea Electric
Can any of the company-specific risk be diversified away by investing in both Korea Steel and Korea Electric 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 Electric 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 Electric Power, you can compare the effects of market volatilities on Korea Steel and Korea Electric 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 Electric. Check out your portfolio center. Please also check ongoing floating volatility patterns of Korea Steel and Korea Electric.
Diversification Opportunities for Korea Steel and Korea Electric
-0.63 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Korea and Korea is -0.63. Overlapping area represents the amount of risk that can be diversified away by holding Korea Steel Co and Korea Electric Power in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Korea Electric Power 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 Electric. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Korea Electric Power has no effect on the direction of Korea Steel i.e., Korea Steel and Korea Electric go up and down completely randomly.
Pair Corralation between Korea Steel and Korea Electric
Assuming the 90 days trading horizon Korea Steel Co is expected to generate 1.14 times more return on investment than Korea Electric. However, Korea Steel is 1.14 times more volatile than Korea Electric Power. It trades about 0.08 of its potential returns per unit of risk. Korea Electric Power is currently generating about -0.04 per unit of risk. If you would invest 151,000 in Korea Steel Co on November 8, 2024 and sell it today you would earn a total of 13,700 from holding Korea Steel Co or generate 9.07% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 98.28% |
| Values | Daily Returns |
Korea Steel Co vs. Korea Electric Power
Performance |
| Timeline |
| Korea Steel |
| Korea Electric Power |
Korea Steel and Korea Electric Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Korea Steel and Korea Electric
The main advantage of trading using opposite Korea Steel and Korea Electric positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Korea Steel position performs unexpectedly, Korea Electric 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 Electric will offset losses from the drop in Korea Electric's long position.| Korea Steel vs. Dong Il Steel | Korea Steel vs. Seah Steel Corp | Korea Steel vs. Ajusteel Co | Korea Steel vs. Ni Steel |
| Korea Electric vs. LG Display | Korea Electric vs. Hyundai Motor | Korea Electric vs. Hyundai Motor Co | Korea Electric vs. Hyundai Motor 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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