Correlation Between Korea Gas and Kakao Games
Can any of the company-specific risk be diversified away by investing in both Korea Gas and Kakao Games 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 Gas and Kakao Games into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Korea Gas and Kakao Games Corp, you can compare the effects of market volatilities on Korea Gas and Kakao Games 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 Gas with a short position of Kakao Games. Check out your portfolio center. Please also check ongoing floating volatility patterns of Korea Gas and Kakao Games.
Diversification Opportunities for Korea Gas and Kakao Games
-0.25 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Korea and Kakao is -0.25. Overlapping area represents the amount of risk that can be diversified away by holding Korea Gas and Kakao Games Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kakao Games Corp and Korea Gas 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 Gas are associated (or correlated) with Kakao Games. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kakao Games Corp has no effect on the direction of Korea Gas i.e., Korea Gas and Kakao Games go up and down completely randomly.
Pair Corralation between Korea Gas and Kakao Games
Assuming the 90 days trading horizon Korea Gas is expected to under-perform the Kakao Games. In addition to that, Korea Gas is 2.08 times more volatile than Kakao Games Corp. It trades about -0.12 of its total potential returns per unit of risk. Kakao Games Corp is currently generating about 0.19 per unit of volatility. If you would invest 1,585,000 in Kakao Games Corp on September 13, 2024 and sell it today you would earn a total of 180,000 from holding Kakao Games Corp or generate 11.36% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Korea Gas vs. Kakao Games Corp
Performance |
| Timeline |
| Korea Gas |
| Kakao Games Corp |
Korea Gas and Kakao Games Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Korea Gas and Kakao Games
The main advantage of trading using opposite Korea Gas and Kakao Games positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Korea Gas position performs unexpectedly, Kakao Games 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 Kakao Games will offset losses from the drop in Kakao Games' long position.| Korea Gas vs. Hyosung Advanced Materials | Korea Gas vs. Union Materials Corp | Korea Gas vs. Iljin Materials Co | Korea Gas vs. TOPMATERIAL LTD |
The effect of pair diversification on risk is to reduce it, but we should note this doesn't apply to all risk types. When we trade pairs against Kakao Games as a counterpart, there is always some inherent risk that will never be diversified away no matter what. This volatility limits the effect of tactical diversification using pair trading. Kakao Games' systematic risk is the inherent uncertainty of the entire market, and therefore cannot be mitigated even by pair-trading it against the equity that is not highly correlated to it. On the other hand, Kakao Games' unsystematic risk describes the types of risk that we can protect against, at least to some degree, by selecting a matching pair that is not perfectly correlated to Kakao Games Corp.
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.
Other Complementary Tools
| Watchlist Optimization Optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm | |
| Sign In To Macroaxis Sign in to explore Macroaxis' wealth optimization platform and fintech modules | |
| Bond Analysis Evaluate and analyze corporate bonds as a potential investment for your portfolios. | |
| Share Portfolio Track or share privately all of your investments from the convenience of any device | |
| Portfolio Rebalancing Analyze risk-adjusted returns against different time horizons to find asset-allocation targets |