Correlation Between Microfriend and Kumho Petro
Can any of the company-specific risk be diversified away by investing in both Microfriend and Kumho Petro 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 Microfriend and Kumho Petro into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Microfriend and Kumho Petro Chemical, you can compare the effects of market volatilities on Microfriend and Kumho Petro 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 Microfriend with a short position of Kumho Petro. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microfriend and Kumho Petro.
Diversification Opportunities for Microfriend and Kumho Petro
0.85 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Microfriend and Kumho is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding Microfriend and Kumho Petro Chemical in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kumho Petro Chemical and Microfriend 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 Microfriend are associated (or correlated) with Kumho Petro. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kumho Petro Chemical has no effect on the direction of Microfriend i.e., Microfriend and Kumho Petro go up and down completely randomly.
Pair Corralation between Microfriend and Kumho Petro
Assuming the 90 days trading horizon Microfriend is expected to under-perform the Kumho Petro. But the stock apears to be less risky and, when comparing its historical volatility, Microfriend is 1.38 times less risky than Kumho Petro. The stock trades about -0.12 of its potential returns per unit of risk. The Kumho Petro Chemical is currently generating about 0.24 of returns per unit of risk over similar time horizon. If you would invest 9,060,000 in Kumho Petro Chemical on October 30, 2024 and sell it today you would earn a total of 1,380,000 from holding Kumho Petro Chemical or generate 15.23% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Strong |
Accuracy | 100.0% |
Values | Daily Returns |
Microfriend vs. Kumho Petro Chemical
Performance |
Timeline |
Microfriend |
Kumho Petro Chemical |
Microfriend and Kumho Petro Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Microfriend and Kumho Petro
The main advantage of trading using opposite Microfriend and Kumho Petro positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microfriend position performs unexpectedly, Kumho Petro 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 Kumho Petro will offset losses from the drop in Kumho Petro's long position.Microfriend vs. Spolytech Co | Microfriend vs. Woori Technology | Microfriend vs. PNC Technologies co | Microfriend vs. A Tech Solution Co |
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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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