Correlation Between Cheryong Industrial and Kyeryong Construction
Can any of the company-specific risk be diversified away by investing in both Cheryong Industrial and Kyeryong Construction 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 Cheryong Industrial and Kyeryong Construction into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Cheryong Industrial CoLtd and Kyeryong Construction Industrial, you can compare the effects of market volatilities on Cheryong Industrial and Kyeryong Construction 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 Cheryong Industrial with a short position of Kyeryong Construction. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cheryong Industrial and Kyeryong Construction.
Diversification Opportunities for Cheryong Industrial and Kyeryong Construction
0.91 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Cheryong and Kyeryong is 0.91. Overlapping area represents the amount of risk that can be diversified away by holding Cheryong Industrial CoLtd and Kyeryong Construction Industri in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kyeryong Construction and Cheryong Industrial 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 Cheryong Industrial CoLtd are associated (or correlated) with Kyeryong Construction. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kyeryong Construction has no effect on the direction of Cheryong Industrial i.e., Cheryong Industrial and Kyeryong Construction go up and down completely randomly.
Pair Corralation between Cheryong Industrial and Kyeryong Construction
Assuming the 90 days trading horizon Cheryong Industrial CoLtd is expected to under-perform the Kyeryong Construction. In addition to that, Cheryong Industrial is 2.37 times more volatile than Kyeryong Construction Industrial. It trades about -0.09 of its total potential returns per unit of risk. Kyeryong Construction Industrial is currently generating about -0.06 per unit of volatility. If you would invest 1,471,000 in Kyeryong Construction Industrial on September 21, 2024 and sell it today you would lose (152,000) from holding Kyeryong Construction Industrial or give up 10.33% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Cheryong Industrial CoLtd vs. Kyeryong Construction Industri
Performance |
| Timeline |
| Cheryong Industrial CoLtd |
| Kyeryong Construction |
Cheryong Industrial and Kyeryong Construction Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Cheryong Industrial and Kyeryong Construction
The main advantage of trading using opposite Cheryong Industrial and Kyeryong Construction positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cheryong Industrial position performs unexpectedly, Kyeryong Construction 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 Kyeryong Construction will offset losses from the drop in Kyeryong Construction's long position.The idea behind Cheryong Industrial CoLtd and Kyeryong Construction Industrial pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.
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 Portfolio Anywhere module to track or share privately all of your investments from the convenience of any device.
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