Correlation Between Kyeryong Construction and Cheryong Industrial
Can any of the company-specific risk be diversified away by investing in both Kyeryong Construction and Cheryong Industrial 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 Kyeryong Construction and Cheryong Industrial into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Kyeryong Construction Industrial and Cheryong Industrial CoLtd, you can compare the effects of market volatilities on Kyeryong Construction and Cheryong Industrial 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 Kyeryong Construction with a short position of Cheryong Industrial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Kyeryong Construction and Cheryong Industrial.
Diversification Opportunities for Kyeryong Construction and Cheryong Industrial
0.91 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Kyeryong and Cheryong is 0.91. Overlapping area represents the amount of risk that can be diversified away by holding Kyeryong Construction Industri and Cheryong Industrial CoLtd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cheryong Industrial CoLtd and Kyeryong Construction 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 Kyeryong Construction Industrial are associated (or correlated) with Cheryong Industrial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cheryong Industrial CoLtd has no effect on the direction of Kyeryong Construction i.e., Kyeryong Construction and Cheryong Industrial go up and down completely randomly.
Pair Corralation between Kyeryong Construction and Cheryong Industrial
Assuming the 90 days trading horizon Kyeryong Construction Industrial is expected to generate 0.42 times more return on investment than Cheryong Industrial. However, Kyeryong Construction Industrial is 2.37 times less risky than Cheryong Industrial. It trades about -0.06 of its potential returns per unit of risk. Cheryong Industrial CoLtd is currently generating about -0.09 per unit of risk. If you would invest 1,471,000 in Kyeryong Construction Industrial on September 21, 2024 and sell it today you would lose (152,000) from holding Kyeryong Construction Industrial or give up 10.33% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Kyeryong Construction Industri vs. Cheryong Industrial CoLtd
Performance |
| Timeline |
| Kyeryong Construction |
| Cheryong Industrial CoLtd |
Kyeryong Construction and Cheryong Industrial Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Kyeryong Construction and Cheryong Industrial
The main advantage of trading using opposite Kyeryong Construction and Cheryong Industrial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Kyeryong Construction position performs unexpectedly, Cheryong Industrial 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 Cheryong Industrial will offset losses from the drop in Cheryong Industrial's long position.The idea behind Kyeryong Construction Industrial and Cheryong Industrial CoLtd 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.
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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.
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