Correlation Between Kukdong Oil and Formetal
Can any of the company-specific risk be diversified away by investing in both Kukdong Oil and Formetal 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 Kukdong Oil and Formetal into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Kukdong Oil Chemicals and Formetal Co, you can compare the effects of market volatilities on Kukdong Oil and Formetal 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 Kukdong Oil with a short position of Formetal. Check out your portfolio center. Please also check ongoing floating volatility patterns of Kukdong Oil and Formetal.
Diversification Opportunities for Kukdong Oil and Formetal
0.26 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Kukdong and Formetal is 0.26. Overlapping area represents the amount of risk that can be diversified away by holding Kukdong Oil Chemicals and Formetal Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Formetal and Kukdong Oil 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 Kukdong Oil Chemicals are associated (or correlated) with Formetal. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Formetal has no effect on the direction of Kukdong Oil i.e., Kukdong Oil and Formetal go up and down completely randomly.
Pair Corralation between Kukdong Oil and Formetal
Assuming the 90 days trading horizon Kukdong Oil Chemicals is expected to under-perform the Formetal. But the stock apears to be less risky and, when comparing its historical volatility, Kukdong Oil Chemicals is 2.11 times less risky than Formetal. The stock trades about -0.03 of its potential returns per unit of risk. The Formetal Co is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest 307,762 in Formetal Co on October 26, 2024 and sell it today you would earn a total of 83,238 from holding Formetal Co or generate 27.05% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Kukdong Oil Chemicals vs. Formetal Co
Performance |
| Timeline |
| Kukdong Oil Chemicals |
| Formetal |
Kukdong Oil and Formetal Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Kukdong Oil and Formetal
The main advantage of trading using opposite Kukdong Oil and Formetal positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Kukdong Oil position performs unexpectedly, Formetal 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 Formetal will offset losses from the drop in Formetal's long position.| Kukdong Oil vs. KB Financial Group | Kukdong Oil vs. Shinhan Financial Group | Kukdong Oil vs. Hana Financial | Kukdong Oil vs. Woori Financial Group |
| Formetal vs. NH Investment Securities | Formetal vs. Digital Power Communications | Formetal vs. DSC Investment | Formetal vs. BGF Retail 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.
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