Correlation Between Korea Electric and Southern
Can any of the company-specific risk be diversified away by investing in both Korea Electric and Southern 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 Southern 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 Southern Company, you can compare the effects of market volatilities on Korea Electric and Southern 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 Southern. Check out your portfolio center. Please also check ongoing floating volatility patterns of Korea Electric and Southern.
Diversification Opportunities for Korea Electric and Southern
0.07 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Korea and Southern is 0.07. Overlapping area represents the amount of risk that can be diversified away by holding Korea Electric Power and Southern Company in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Southern 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 Southern. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Southern has no effect on the direction of Korea Electric i.e., Korea Electric and Southern go up and down completely randomly.
Pair Corralation between Korea Electric and Southern
Considering the 90-day investment horizon Korea Electric is expected to generate 1.9 times less return on investment than Southern. In addition to that, Korea Electric is 2.17 times more volatile than Southern Company. It trades about 0.02 of its total potential returns per unit of risk. Southern Company is currently generating about 0.08 per unit of volatility. If you would invest 6,873 in Southern Company on September 14, 2024 and sell it today you would earn a total of 1,466 from holding Southern Company or generate 21.33% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Korea Electric Power vs. Southern Company
Performance |
| Timeline |
| Korea Electric Power |
| Southern |
Korea Electric and Southern Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Korea Electric and Southern
The main advantage of trading using opposite Korea Electric and Southern positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Korea Electric position performs unexpectedly, Southern 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 Southern will offset losses from the drop in Southern'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 |
| Southern vs. Centrais Eltricas Brasileiras | Southern vs. Korea Electric Power | Southern vs. CMS Energy | Southern vs. Centrais Electricas Brasileiras |
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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.
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