Correlation Between Formetal and Korea New
Can any of the company-specific risk be diversified away by investing in both Formetal and Korea New 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 Formetal and Korea New into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Formetal Co and Korea New Network, you can compare the effects of market volatilities on Formetal and Korea New 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 Formetal with a short position of Korea New. Check out your portfolio center. Please also check ongoing floating volatility patterns of Formetal and Korea New.
Diversification Opportunities for Formetal and Korea New
Very weak diversification
The 3 months correlation between Formetal and Korea is 0.51. Overlapping area represents the amount of risk that can be diversified away by holding Formetal Co and Korea New Network in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Korea New Network and Formetal 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 Formetal Co are associated (or correlated) with Korea New. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Korea New Network has no effect on the direction of Formetal i.e., Formetal and Korea New go up and down completely randomly.
Pair Corralation between Formetal and Korea New
Assuming the 90 days trading horizon Formetal Co is expected to under-perform the Korea New. But the stock apears to be less risky and, when comparing its historical volatility, Formetal Co is 1.11 times less risky than Korea New. The stock trades about -0.27 of its potential returns per unit of risk. The Korea New Network is currently generating about -0.16 of returns per unit of risk over similar time horizon. If you would invest 82,900 in Korea New Network on September 1, 2024 and sell it today you would lose (5,800) from holding Korea New Network or give up 7.0% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 95.65% |
| Values | Daily Returns |
Formetal Co vs. Korea New Network
Performance |
| Timeline |
| Formetal |
| Korea New Network |
Formetal and Korea New Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Formetal and Korea New
The main advantage of trading using opposite Formetal and Korea New positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Formetal position performs unexpectedly, Korea New 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 Korea New will offset losses from the drop in Korea New's long position.| Formetal vs. COWINTECH Co | Formetal vs. Young Poong Precision | Formetal vs. Seoam Machinery Industry | Formetal vs. Haisung TPC Co |
| Korea New vs. KT Submarine Telecom | Korea New vs. SK Telecom Co | Korea New vs. Formetal Co | Korea New vs. Innowireless 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.
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