Correlation Between KEPCO Engineering and Hankook Furniture
Can any of the company-specific risk be diversified away by investing in both KEPCO Engineering and Hankook Furniture 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 KEPCO Engineering and Hankook Furniture into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between KEPCO Engineering Construction and Hankook Furniture Co, you can compare the effects of market volatilities on KEPCO Engineering and Hankook Furniture 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 KEPCO Engineering with a short position of Hankook Furniture. Check out your portfolio center. Please also check ongoing floating volatility patterns of KEPCO Engineering and Hankook Furniture.
Diversification Opportunities for KEPCO Engineering and Hankook Furniture
-0.45 | Correlation Coefficient |
Very good diversification
The 3 months correlation between KEPCO and Hankook is -0.45. Overlapping area represents the amount of risk that can be diversified away by holding KEPCO Engineering Construction and Hankook Furniture Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hankook Furniture and KEPCO Engineering 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 KEPCO Engineering Construction are associated (or correlated) with Hankook Furniture. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hankook Furniture has no effect on the direction of KEPCO Engineering i.e., KEPCO Engineering and Hankook Furniture go up and down completely randomly.
Pair Corralation between KEPCO Engineering and Hankook Furniture
Assuming the 90 days trading horizon KEPCO Engineering Construction is expected to generate 2.09 times more return on investment than Hankook Furniture. However, KEPCO Engineering is 2.09 times more volatile than Hankook Furniture Co. It trades about 1.04 of its potential returns per unit of risk. Hankook Furniture Co is currently generating about 0.05 per unit of risk. If you would invest 5,370,000 in KEPCO Engineering Construction on November 1, 2024 and sell it today you would earn a total of 1,450,000 from holding KEPCO Engineering Construction or generate 27.0% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
KEPCO Engineering Construction vs. Hankook Furniture Co
Performance |
| Timeline |
| KEPCO Engineering |
| Hankook Furniture |
KEPCO Engineering and Hankook Furniture Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with KEPCO Engineering and Hankook Furniture
The main advantage of trading using opposite KEPCO Engineering and Hankook Furniture positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if KEPCO Engineering position performs unexpectedly, Hankook Furniture 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 Hankook Furniture will offset losses from the drop in Hankook Furniture's long position.| KEPCO Engineering vs. Ssangyong Information Communication | KEPCO Engineering vs. Lotte Data Communication | KEPCO Engineering vs. Kisan Telecom Co | KEPCO Engineering vs. Hotel Shilla Co |
| Hankook Furniture vs. BGF Retail Co | Hankook Furniture vs. Tamul Multimedia Co | Hankook Furniture vs. SEOJEON ELECTRIC MACHINERY | Hankook Furniture vs. Jeju Beer 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.
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