Correlation Between Kolon Life and Korean Drug
Can any of the company-specific risk be diversified away by investing in both Kolon Life and Korean Drug 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 Kolon Life and Korean Drug into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Kolon Life Science and Korean Drug Co, you can compare the effects of market volatilities on Kolon Life and Korean Drug 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 Kolon Life with a short position of Korean Drug. Check out your portfolio center. Please also check ongoing floating volatility patterns of Kolon Life and Korean Drug.
Diversification Opportunities for Kolon Life and Korean Drug
0.4 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Kolon and Korean is 0.4. Overlapping area represents the amount of risk that can be diversified away by holding Kolon Life Science and Korean Drug Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Korean Drug and Kolon Life 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 Kolon Life Science are associated (or correlated) with Korean Drug. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Korean Drug has no effect on the direction of Kolon Life i.e., Kolon Life and Korean Drug go up and down completely randomly.
Pair Corralation between Kolon Life and Korean Drug
Assuming the 90 days trading horizon Kolon Life Science is expected to under-perform the Korean Drug. In addition to that, Kolon Life is 1.26 times more volatile than Korean Drug Co. It trades about -0.09 of its total potential returns per unit of risk. Korean Drug Co is currently generating about 0.1 per unit of volatility. If you would invest 465,000 in Korean Drug Co on November 3, 2024 and sell it today you would earn a total of 13,500 from holding Korean Drug Co or generate 2.9% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Kolon Life Science vs. Korean Drug Co
Performance |
| Timeline |
| Kolon Life Science |
| Korean Drug |
Kolon Life and Korean Drug Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Kolon Life and Korean Drug
The main advantage of trading using opposite Kolon Life and Korean Drug positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Kolon Life position performs unexpectedly, Korean Drug 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 Korean Drug will offset losses from the drop in Korean Drug's long position.| Kolon Life vs. Hyundai Engineering Plastics | Kolon Life vs. Heungkuk Metaltech CoLtd | Kolon Life vs. Kolon Plastics | Kolon Life vs. National Plastic Co |
| Korean Drug vs. Samsung Life Insurance | Korean Drug vs. Samlip General Foods | Korean Drug vs. Settlebank | Korean Drug vs. Hana Financial |
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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.
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