Correlation Between ABCO Electronics and KakaoBank Corp
Can any of the company-specific risk be diversified away by investing in both ABCO Electronics and KakaoBank Corp 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 ABCO Electronics and KakaoBank Corp into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between ABCO Electronics Co and KakaoBank Corp, you can compare the effects of market volatilities on ABCO Electronics and KakaoBank Corp 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 ABCO Electronics with a short position of KakaoBank Corp. Check out your portfolio center. Please also check ongoing floating volatility patterns of ABCO Electronics and KakaoBank Corp.
Diversification Opportunities for ABCO Electronics and KakaoBank Corp
-0.34 | Correlation Coefficient |
Very good diversification
The 3 months correlation between ABCO and KakaoBank is -0.34. Overlapping area represents the amount of risk that can be diversified away by holding ABCO Electronics Co and KakaoBank Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on KakaoBank Corp and ABCO Electronics 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 ABCO Electronics Co are associated (or correlated) with KakaoBank Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of KakaoBank Corp has no effect on the direction of ABCO Electronics i.e., ABCO Electronics and KakaoBank Corp go up and down completely randomly.
Pair Corralation between ABCO Electronics and KakaoBank Corp
Assuming the 90 days trading horizon ABCO Electronics Co is expected to under-perform the KakaoBank Corp. In addition to that, ABCO Electronics is 1.18 times more volatile than KakaoBank Corp. It trades about -0.07 of its total potential returns per unit of risk. KakaoBank Corp is currently generating about 0.0 per unit of volatility. If you would invest 2,315,000 in KakaoBank Corp on October 30, 2024 and sell it today you would lose (250,000) from holding KakaoBank Corp or give up 10.8% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
ABCO Electronics Co vs. KakaoBank Corp
Performance |
| Timeline |
| ABCO Electronics |
| KakaoBank Corp |
ABCO Electronics and KakaoBank Corp Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with ABCO Electronics and KakaoBank Corp
The main advantage of trading using opposite ABCO Electronics and KakaoBank Corp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ABCO Electronics position performs unexpectedly, KakaoBank Corp 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 KakaoBank Corp will offset losses from the drop in KakaoBank Corp's long position.| ABCO Electronics vs. Youl Chon Chemical | ABCO Electronics vs. Kukdong Oil Chemicals | ABCO Electronics vs. Kukdo Chemical Co | ABCO Electronics vs. Kg Chemical |
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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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.
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