Correlation Between Korea Information and Korea Steel
Can any of the company-specific risk be diversified away by investing in both Korea Information and Korea Steel 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 Korea Information and Korea Steel into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Korea Information Communications and Korea Steel Co, you can compare the effects of market volatilities on Korea Information and Korea Steel 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 Korea Information with a short position of Korea Steel. Check out your portfolio center. Please also check ongoing floating volatility patterns of Korea Information and Korea Steel.
Diversification Opportunities for Korea Information and Korea Steel
0.02 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Korea and Korea is 0.02. Overlapping area represents the amount of risk that can be diversified away by holding Korea Information Communicatio and Korea Steel Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Korea Steel and Korea Information 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 Korea Information Communications are associated (or correlated) with Korea Steel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Korea Steel has no effect on the direction of Korea Information i.e., Korea Information and Korea Steel go up and down completely randomly.
Pair Corralation between Korea Information and Korea Steel
Assuming the 90 days trading horizon Korea Information Communications is expected to generate 0.56 times more return on investment than Korea Steel. However, Korea Information Communications is 1.79 times less risky than Korea Steel. It trades about -0.19 of its potential returns per unit of risk. Korea Steel Co is currently generating about -0.1 per unit of risk. If you would invest 818,000 in Korea Information Communications on November 9, 2024 and sell it today you would lose (20,000) from holding Korea Information Communications or give up 2.44% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Korea Information Communicatio vs. Korea Steel Co
Performance |
| Timeline |
| Korea Information |
| Korea Steel |
Korea Information and Korea Steel Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Korea Information and Korea Steel
The main advantage of trading using opposite Korea Information and Korea Steel positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Korea Information position performs unexpectedly, Korea Steel 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 Steel will offset losses from the drop in Korea Steel's long position.| Korea Information vs. Tway Air Co | Korea Information vs. Sk Biopharmaceuticals Co | Korea Information vs. Jeju Air Co | Korea Information vs. CJ Seafood Corp |
| Korea Steel vs. Daejoo Electronic Materials | Korea Steel vs. Korea Electronic Certification | Korea Steel vs. InnoTherapy | Korea Steel vs. Anam Electronics 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.
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