Correlation Between Iljin Materials and KEPCO Engineering
Can any of the company-specific risk be diversified away by investing in both Iljin Materials and KEPCO Engineering 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 Iljin Materials and KEPCO Engineering into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Iljin Materials Co and KEPCO Engineering Construction, you can compare the effects of market volatilities on Iljin Materials and KEPCO Engineering 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 Iljin Materials with a short position of KEPCO Engineering. Check out your portfolio center. Please also check ongoing floating volatility patterns of Iljin Materials and KEPCO Engineering.
Diversification Opportunities for Iljin Materials and KEPCO Engineering
0.4 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Iljin and KEPCO is 0.4. Overlapping area represents the amount of risk that can be diversified away by holding Iljin Materials Co and KEPCO Engineering Construction in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on KEPCO Engineering and Iljin Materials 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 Iljin Materials Co are associated (or correlated) with KEPCO Engineering. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of KEPCO Engineering has no effect on the direction of Iljin Materials i.e., Iljin Materials and KEPCO Engineering go up and down completely randomly.
Pair Corralation between Iljin Materials and KEPCO Engineering
Assuming the 90 days trading horizon Iljin Materials Co is expected to under-perform the KEPCO Engineering. But the stock apears to be less risky and, when comparing its historical volatility, Iljin Materials Co is 1.15 times less risky than KEPCO Engineering. The stock trades about -0.36 of its potential returns per unit of risk. The KEPCO Engineering Construction is currently generating about -0.28 of returns per unit of risk over similar time horizon. If you would invest 6,810,000 in KEPCO Engineering Construction on September 13, 2024 and sell it today you would lose (1,680,000) from holding KEPCO Engineering Construction or give up 24.67% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Iljin Materials Co vs. KEPCO Engineering Construction
Performance |
| Timeline |
| Iljin Materials |
| KEPCO Engineering |
Iljin Materials and KEPCO Engineering Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Iljin Materials and KEPCO Engineering
The main advantage of trading using opposite Iljin Materials and KEPCO Engineering positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Iljin Materials position performs unexpectedly, KEPCO Engineering 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 KEPCO Engineering will offset losses from the drop in KEPCO Engineering's long position.| Iljin Materials vs. Samsung Electronics Co | Iljin Materials vs. Samsung Electronics Co | Iljin Materials vs. LG Energy Solution | Iljin Materials vs. SK Hynix |
| KEPCO Engineering vs. Hyundai Engineering Construction | KEPCO Engineering vs. Camus Engineering Construction | KEPCO Engineering vs. Solution Advanced Technology | KEPCO Engineering vs. Busan Industrial 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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.
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