Correlation Between Kakao Games and SEOJEON ELECTRIC

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Can any of the company-specific risk be diversified away by investing in both Kakao Games and SEOJEON ELECTRIC 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 Kakao Games and SEOJEON ELECTRIC into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Kakao Games Corp and SEOJEON ELECTRIC MACHINERY, you can compare the effects of market volatilities on Kakao Games and SEOJEON ELECTRIC 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 Kakao Games with a short position of SEOJEON ELECTRIC. Check out your portfolio center. Please also check ongoing floating volatility patterns of Kakao Games and SEOJEON ELECTRIC.

Diversification Opportunities for Kakao Games and SEOJEON ELECTRIC

KakaoSEOJEONDiversified AwayKakaoSEOJEONDiversified Away100%
-0.55
  Correlation Coefficient

Excellent diversification

The 3 months correlation between Kakao and SEOJEON is -0.55. Overlapping area represents the amount of risk that can be diversified away by holding Kakao Games Corp and SEOJEON ELECTRIC MACHINERY in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SEOJEON ELECTRIC MAC and Kakao Games 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 Kakao Games Corp are associated (or correlated) with SEOJEON ELECTRIC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SEOJEON ELECTRIC MAC has no effect on the direction of Kakao Games i.e., Kakao Games and SEOJEON ELECTRIC go up and down completely randomly.

Pair Corralation between Kakao Games and SEOJEON ELECTRIC

Assuming the 90 days trading horizon Kakao Games Corp is expected to under-perform the SEOJEON ELECTRIC. But the stock apears to be less risky and, when comparing its historical volatility, Kakao Games Corp is 1.93 times less risky than SEOJEON ELECTRIC. The stock trades about -0.14 of its potential returns per unit of risk. The SEOJEON ELECTRIC MACHINERY is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  502,000  in SEOJEON ELECTRIC MACHINERY on November 21, 2024 and sell it today you would earn a total of  17,000  from holding SEOJEON ELECTRIC MACHINERY or generate 3.39% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthVery Weak
Accuracy100.0%
ValuesDaily Returns

Kakao Games Corp  vs.  SEOJEON ELECTRIC MACHINERY

 Performance 
JavaScript chart by amCharts 3.21.15Dec2025Feb -30-20-1001020
JavaScript chart by amCharts 3.21.15293490 189860
       Timeline  
Kakao Games Corp 

Risk-Adjusted Performance

Weak

 
Weak
 
Strong
Compared to the overall equity markets, risk-adjusted returns on investments in Kakao Games Corp are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Kakao Games is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.
JavaScript chart by amCharts 3.21.15DecJanFebJanFeb15,00016,00017,00018,00019,00020,00021,00022,000
SEOJEON ELECTRIC MAC 

Risk-Adjusted Performance

Modest

 
Weak
 
Strong
Compared to the overall equity markets, risk-adjusted returns on investments in SEOJEON ELECTRIC MACHINERY are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, SEOJEON ELECTRIC sustained solid returns over the last few months and may actually be approaching a breakup point.
JavaScript chart by amCharts 3.21.15DecJanFebJanFeb3,5004,0004,5005,0005,500

Kakao Games and SEOJEON ELECTRIC Volatility Contrast

   Predicted Return Density   
JavaScript chart by amCharts 3.21.15-5.42-4.06-2.7-1.34-0.02241.32.643.985.326.66 0.0220.0240.0260.0280.0300.0320.034
JavaScript chart by amCharts 3.21.15293490 189860
       Returns  

Pair Trading with Kakao Games and SEOJEON ELECTRIC

The main advantage of trading using opposite Kakao Games and SEOJEON ELECTRIC positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Kakao Games position performs unexpectedly, SEOJEON ELECTRIC 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 SEOJEON ELECTRIC will offset losses from the drop in SEOJEON ELECTRIC's long position.
The effect of pair diversification on risk is to reduce it, but we should note this doesn't apply to all risk types. When we trade pairs against Kakao Games as a counterpart, there is always some inherent risk that will never be diversified away no matter what. This volatility limits the effect of tactical diversification using pair trading. Kakao Games' systematic risk is the inherent uncertainty of the entire market, and therefore cannot be mitigated even by pair-trading it against the equity that is not highly correlated to it. On the other hand, Kakao Games' unsystematic risk describes the types of risk that we can protect against, at least to some degree, by selecting a matching pair that is not perfectly correlated to Kakao Games Corp.
The idea behind Kakao Games Corp and SEOJEON ELECTRIC MACHINERY 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.
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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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