Correlation Between HMM and Korea Computer
Can any of the company-specific risk be diversified away by investing in both HMM and Korea Computer 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 HMM and Korea Computer into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between HMM Co and Korea Computer, you can compare the effects of market volatilities on HMM and Korea Computer 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 HMM with a short position of Korea Computer. Check out your portfolio center. Please also check ongoing floating volatility patterns of HMM and Korea Computer.
Diversification Opportunities for HMM and Korea Computer
0.2 | Correlation Coefficient |
Modest diversification
The 3 months correlation between HMM and Korea is 0.2. Overlapping area represents the amount of risk that can be diversified away by holding HMM Co and Korea Computer in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Korea Computer and HMM 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 HMM Co are associated (or correlated) with Korea Computer. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Korea Computer has no effect on the direction of HMM i.e., HMM and Korea Computer go up and down completely randomly.
Pair Corralation between HMM and Korea Computer
Assuming the 90 days trading horizon HMM Co is expected to generate 1.41 times more return on investment than Korea Computer. However, HMM is 1.41 times more volatile than Korea Computer. It trades about 0.11 of its potential returns per unit of risk. Korea Computer is currently generating about 0.12 per unit of risk. If you would invest 1,766,000 in HMM Co on October 29, 2024 and sell it today you would earn a total of 98,000 from holding HMM Co or generate 5.55% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
HMM Co vs. Korea Computer
Performance |
| Timeline |
| HMM Co |
| Korea Computer |
HMM and Korea Computer Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with HMM and Korea Computer
The main advantage of trading using opposite HMM and Korea Computer positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if HMM position performs unexpectedly, Korea Computer 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 Computer will offset losses from the drop in Korea Computer's long position.The idea behind HMM Co and Korea Computer 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 Computer vs. LG Display Co | Korea Computer vs. ChipsMedia | Korea Computer vs. Ssangyong Information Communication | Korea Computer vs. Daishin Information Communications |
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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.
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