Correlation Between Kbi Metal and Korean Drug
Can any of the company-specific risk be diversified away by investing in both Kbi Metal and Korean Drug 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 Kbi Metal and Korean Drug into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Kbi Metal Co and Korean Drug Co, you can compare the effects of market volatilities on Kbi Metal and Korean Drug 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 Kbi Metal with a short position of Korean Drug. Check out your portfolio center. Please also check ongoing floating volatility patterns of Kbi Metal and Korean Drug.
Diversification Opportunities for Kbi Metal and Korean Drug
0.83 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Kbi and Korean is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding Kbi Metal Co and Korean Drug Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Korean Drug and Kbi Metal 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 Kbi Metal Co are associated (or correlated) with Korean Drug. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Korean Drug has no effect on the direction of Kbi Metal i.e., Kbi Metal and Korean Drug go up and down completely randomly.
Pair Corralation between Kbi Metal and Korean Drug
Assuming the 90 days trading horizon Kbi Metal Co is expected to under-perform the Korean Drug. In addition to that, Kbi Metal is 2.5 times more volatile than Korean Drug Co. It trades about -0.32 of its total potential returns per unit of risk. Korean Drug Co is currently generating about -0.22 per unit of volatility. If you would invest 488,000 in Korean Drug Co on August 29, 2024 and sell it today you would lose (30,000) from holding Korean Drug Co or give up 6.15% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Kbi Metal Co vs. Korean Drug Co
Performance |
| Timeline |
| Kbi Metal |
| Korean Drug |
Kbi Metal and Korean Drug Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Kbi Metal and Korean Drug
The main advantage of trading using opposite Kbi Metal and Korean Drug positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Kbi Metal position performs unexpectedly, Korean Drug 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 Korean Drug will offset losses from the drop in Korean Drug's long position.| Kbi Metal vs. Busan Industrial Co | Kbi Metal vs. Busan Ind | Kbi Metal vs. Mirae Asset Daewoo | Kbi Metal vs. UNISEM Co |
| Korean Drug vs. Aminologics CoLtd | Korean Drug vs. Withuspharmaceutical CoLtd | Korean Drug vs. High Tech Pharm |
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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