Correlation Between Dow Jones and Korea Computer
Can any of the company-specific risk be diversified away by investing in both Dow Jones and Korea Computer 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 Dow Jones and Korea Computer into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Dow Jones Industrial and Korea Computer Systems, you can compare the effects of market volatilities on Dow Jones and Korea Computer 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 Dow Jones with a short position of Korea Computer. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dow Jones and Korea Computer.
Diversification Opportunities for Dow Jones and Korea Computer
-0.26 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Dow and Korea is -0.26. Overlapping area represents the amount of risk that can be diversified away by holding Dow Jones Industrial and Korea Computer Systems in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Korea Computer Systems and Dow Jones 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 Dow Jones Industrial are associated (or correlated) with Korea Computer. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Korea Computer Systems has no effect on the direction of Dow Jones i.e., Dow Jones and Korea Computer go up and down completely randomly.
Pair Corralation between Dow Jones and Korea Computer
Assuming the 90 days trading horizon Dow Jones is expected to generate 11.89 times less return on investment than Korea Computer. But when comparing it to its historical volatility, Dow Jones Industrial is 9.37 times less risky than Korea Computer. It trades about 0.1 of its potential returns per unit of risk. Korea Computer Systems is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest 702,713 in Korea Computer Systems on October 26, 2024 and sell it today you would earn a total of 407,287 from holding Korea Computer Systems or generate 57.96% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 96.77% |
| Values | Daily Returns |
Dow Jones Industrial vs. Korea Computer Systems
Performance |
| Timeline |
Dow Jones and Korea Computer Volatility Contrast
Predicted Return Density |
| Returns |
Dow Jones Industrial
Pair trading matchups for Dow Jones
Korea Computer Systems
Pair trading matchups for Korea Computer
Pair Trading with Dow Jones and Korea Computer
The main advantage of trading using opposite Dow Jones and Korea Computer positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dow Jones position performs unexpectedly, Korea Computer 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 Computer will offset losses from the drop in Korea Computer's long position.| Dow Jones vs. Asure Software | Dow Jones vs. Amkor Technology | Dow Jones vs. Radcom | Dow Jones vs. Senmiao Technology |
| Korea Computer vs. Iljin Display | Korea Computer vs. LG Chemicals | Korea Computer vs. DB Insurance Co | Korea Computer vs. Sangsin Energy Display |
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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.
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