Correlation Between Korea New and Next Entertainment
Can any of the company-specific risk be diversified away by investing in both Korea New and Next Entertainment 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 New and Next Entertainment into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Korea New Network and Next Entertainment World, you can compare the effects of market volatilities on Korea New and Next Entertainment 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 New with a short position of Next Entertainment. Check out your portfolio center. Please also check ongoing floating volatility patterns of Korea New and Next Entertainment.
Diversification Opportunities for Korea New and Next Entertainment
0.27 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Korea and Next is 0.27. Overlapping area represents the amount of risk that can be diversified away by holding Korea New Network and Next Entertainment World in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Next Entertainment World and Korea New 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 New Network are associated (or correlated) with Next Entertainment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Next Entertainment World has no effect on the direction of Korea New i.e., Korea New and Next Entertainment go up and down completely randomly.
Pair Corralation between Korea New and Next Entertainment
Assuming the 90 days trading horizon Korea New Network is expected to under-perform the Next Entertainment. But the stock apears to be less risky and, when comparing its historical volatility, Korea New Network is 1.55 times less risky than Next Entertainment. The stock trades about -0.04 of its potential returns per unit of risk. The Next Entertainment World is currently generating about 0.0 of returns per unit of risk over similar time horizon. If you would invest 231,000 in Next Entertainment World on August 29, 2024 and sell it today you would lose (2,000) from holding Next Entertainment World or give up 0.87% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Korea New Network vs. Next Entertainment World
Performance |
| Timeline |
| Korea New Network |
| Next Entertainment World |
Korea New and Next Entertainment Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Korea New and Next Entertainment
The main advantage of trading using opposite Korea New and Next Entertainment positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Korea New position performs unexpectedly, Next Entertainment 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 Next Entertainment will offset losses from the drop in Next Entertainment's long position.| Korea New vs. Hyundai Engineering Plastics | Korea New vs. Dongwon Metal Co | Korea New vs. Taeyang Metal Industrial | Korea New vs. LS Materials |
| Next Entertainment vs. Korea New Network | Next Entertainment vs. Busan Industrial Co | Next Entertainment vs. Busan Ind | Next Entertainment vs. Shinhan WTI Futures |
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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.
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