Correlation Between Korean Drug and Korea Information
Can any of the company-specific risk be diversified away by investing in both Korean Drug 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 Korean Drug and Korea Information into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Korean Drug Co and Korea Information Communications, you can compare the effects of market volatilities on Korean Drug 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 Korean Drug with a short position of Korea Information. Check out your portfolio center. Please also check ongoing floating volatility patterns of Korean Drug and Korea Information.
Diversification Opportunities for Korean Drug and Korea Information
0.2 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Korean and Korea is 0.2. Overlapping area represents the amount of risk that can be diversified away by holding Korean Drug 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 Korean Drug 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 Korean Drug 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 Korean Drug i.e., Korean Drug and Korea Information go up and down completely randomly.
Pair Corralation between Korean Drug and Korea Information
Assuming the 90 days trading horizon Korean Drug Co is expected to generate 1.97 times more return on investment than Korea Information. However, Korean Drug is 1.97 times more volatile than Korea Information Communications. It trades about 0.1 of its potential returns per unit of risk. Korea Information Communications is currently generating about 0.05 per unit of risk. If you would invest 465,000 in Korean Drug Co on November 3, 2024 and sell it today you would earn a total of 13,500 from holding Korean Drug Co or generate 2.9% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Korean Drug Co vs. Korea Information Communicatio
Performance |
| Timeline |
| Korean Drug |
| Korea Information |
Korean Drug and Korea Information Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Korean Drug and Korea Information
The main advantage of trading using opposite Korean Drug and Korea Information positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Korean Drug 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.| Korean Drug vs. Jeong Moon Information | Korean Drug vs. SK Chemicals Co | Korean Drug vs. Daishin Information Communications | Korean Drug vs. Sewoon Medical Co |
| Korea Information vs. LG Electronics | Korea Information vs. Seoul Electronics Telecom | Korea Information vs. SK Telecom Co | Korea Information vs. Dongbang Transport Logistics |
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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.
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