Correlation Between Korea Investment and Daewoo Engineering
Can any of the company-specific risk be diversified away by investing in both Korea Investment and Daewoo Engineering 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 Investment and Daewoo Engineering into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Korea Investment Holdings and Daewoo Engineering Construction, you can compare the effects of market volatilities on Korea Investment and Daewoo Engineering 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 Investment with a short position of Daewoo Engineering. Check out your portfolio center. Please also check ongoing floating volatility patterns of Korea Investment and Daewoo Engineering.
Diversification Opportunities for Korea Investment and Daewoo Engineering
-0.54 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Korea and Daewoo is -0.54. Overlapping area represents the amount of risk that can be diversified away by holding Korea Investment Holdings and Daewoo Engineering Constructio in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Daewoo Engineering and Korea Investment 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 Investment Holdings are associated (or correlated) with Daewoo Engineering. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Daewoo Engineering has no effect on the direction of Korea Investment i.e., Korea Investment and Daewoo Engineering go up and down completely randomly.
Pair Corralation between Korea Investment and Daewoo Engineering
Assuming the 90 days trading horizon Korea Investment is expected to generate 1.79 times less return on investment than Daewoo Engineering. But when comparing it to its historical volatility, Korea Investment Holdings is 2.55 times less risky than Daewoo Engineering. It trades about 0.14 of its potential returns per unit of risk. Daewoo Engineering Construction is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest 353,500 in Daewoo Engineering Construction on September 1, 2024 and sell it today you would earn a total of 15,500 from holding Daewoo Engineering Construction or generate 4.38% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Korea Investment Holdings vs. Daewoo Engineering Constructio
Performance |
| Timeline |
| Korea Investment Holdings |
| Daewoo Engineering |
Korea Investment and Daewoo Engineering Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Korea Investment and Daewoo Engineering
The main advantage of trading using opposite Korea Investment and Daewoo Engineering positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Korea Investment position performs unexpectedly, Daewoo Engineering 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 Daewoo Engineering will offset losses from the drop in Daewoo Engineering's long position.| Korea Investment vs. GS Retail Co | Korea Investment vs. Handok Clean Tech | Korea Investment vs. Samsung Life Insurance | Korea Investment vs. Clean Science co |
| Daewoo Engineering vs. Korea New Network | Daewoo Engineering vs. ICD Co | Daewoo Engineering vs. DYPNF CoLtd | Daewoo Engineering vs. Busan Industrial 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 Transaction History module to view history of all your transactions and understand their impact on performance.
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