Correlation Between Korea Electric and SCE Trust
Can any of the company-specific risk be diversified away by investing in both Korea Electric and SCE Trust 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 Korea Electric and SCE Trust into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Korea Electric Power and SCE Trust II, you can compare the effects of market volatilities on Korea Electric and SCE Trust 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 Korea Electric with a short position of SCE Trust. Check out your portfolio center. Please also check ongoing floating volatility patterns of Korea Electric and SCE Trust.
Diversification Opportunities for Korea Electric and SCE Trust
-0.44 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Korea and SCE is -0.44. Overlapping area represents the amount of risk that can be diversified away by holding Korea Electric Power and SCE Trust II in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SCE Trust II and Korea Electric 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 Korea Electric Power are associated (or correlated) with SCE Trust. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SCE Trust II has no effect on the direction of Korea Electric i.e., Korea Electric and SCE Trust go up and down completely randomly.
Pair Corralation between Korea Electric and SCE Trust
Considering the 90-day investment horizon Korea Electric Power is expected to generate 3.37 times more return on investment than SCE Trust. However, Korea Electric is 3.37 times more volatile than SCE Trust II. It trades about 0.13 of its potential returns per unit of risk. SCE Trust II is currently generating about 0.06 per unit of risk. If you would invest 825.00 in Korea Electric Power on August 31, 2024 and sell it today you would earn a total of 47.00 from holding Korea Electric Power or generate 5.7% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Korea Electric Power vs. SCE Trust II
Performance |
| Timeline |
| Korea Electric Power |
| SCE Trust II |
Korea Electric and SCE Trust Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Korea Electric and SCE Trust
The main advantage of trading using opposite Korea Electric and SCE Trust positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Korea Electric position performs unexpectedly, SCE Trust 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 SCE Trust will offset losses from the drop in SCE Trust's long position.| Korea Electric vs. Enel Chile SA | Korea Electric vs. Centrais Eltricas Brasileiras | Korea Electric vs. Central Puerto SA | Korea Electric vs. CMS Energy |
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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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..
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