Correlation Between Korea Steel and Korea Information

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Can any of the company-specific risk be diversified away by investing in both Korea Steel and Korea Information 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 Information 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 Information Communications, you can compare the effects of market volatilities on Korea Steel and Korea Information 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 Information. Check out your portfolio center. Please also check ongoing floating volatility patterns of Korea Steel and Korea Information.

Diversification Opportunities for Korea Steel and Korea Information

KoreaKoreaDiversified AwayKoreaKoreaDiversified Away100%
-0.23
  Correlation Coefficient

Very good diversification

The 3 months correlation between Korea and Korea is -0.23. Overlapping area represents the amount of risk that can be diversified away by holding Korea Steel Co and Korea Information Communicatio in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Korea Information 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 Information. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Korea Information has no effect on the direction of Korea Steel i.e., Korea Steel and Korea Information go up and down completely randomly.

Pair Corralation between Korea Steel and Korea Information

Assuming the 90 days trading horizon Korea Steel Co is expected to generate 1.02 times more return on investment than Korea Information. However, Korea Steel is 1.02 times more volatile than Korea Information Communications. It trades about 0.09 of its potential returns per unit of risk. Korea Information Communications is currently generating about -0.09 per unit of risk. If you would invest  164,500  in Korea Steel Co on November 25, 2024 and sell it today you would earn a total of  3,000  from holding Korea Steel Co or generate 1.82% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthInsignificant
Accuracy100.0%
ValuesDaily Returns

Korea Steel Co  vs.  Korea Information Communicatio

 Performance 
JavaScript chart by amCharts 3.21.15Dec2025Feb -15-10-5051015
JavaScript chart by amCharts 3.21.15007280 025770
       Timeline  
Korea Steel 

Risk-Adjusted Performance

Good

 
Weak
 
Strong
Compared to the overall equity markets, risk-adjusted returns on investments in Korea Steel Co are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Korea Steel sustained solid returns over the last few months and may actually be approaching a breakup point.
JavaScript chart by amCharts 3.21.15DecJanFebJanFeb1,3001,4001,5001,6001,700
Korea Information 

Risk-Adjusted Performance

Very Weak

 
Weak
 
Strong
Over the last 90 days Korea Information Communications has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Korea Information is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.
JavaScript chart by amCharts 3.21.15DecJanFebJanFeb7,5007,6007,7007,8007,9008,0008,1008,2008,3008,400

Korea Steel and Korea Information Volatility Contrast

   Predicted Return Density   
JavaScript chart by amCharts 3.21.15-6.49-4.86-3.23-1.6-0.021.673.415.146.878.6 0.050.100.150.200.25
JavaScript chart by amCharts 3.21.15007280 025770
       Returns  

Pair Trading with Korea Steel and Korea Information

The main advantage of trading using opposite Korea Steel and Korea Information positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Korea Steel position performs unexpectedly, Korea Information 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 Information will offset losses from the drop in Korea Information's long position.
The idea behind Korea Steel Co and Korea Information Communications 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.
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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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.

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