Correlation Between Kosdaq Composite and CHEMTRONICSCOLtd

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Apply Can any of the company-specific risk be diversified away by investing in both Kosdaq Composite and CHEMTRONICSCOLtd 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 Kosdaq Composite and CHEMTRONICSCOLtd into the same portfolio, which is an essential part of the fundamental portfolio management process.

Diversification Opportunities for Kosdaq Composite and CHEMTRONICSCOLtd

Pair Corralation between Kosdaq Composite and CHEMTRONICSCOLtd

Kosdaq Composite Index  vs.  CHEMTRONICSCOLtd

Pair Trading with Kosdaq Composite and CHEMTRONICSCOLtd

The main advantage of trading using opposite Kosdaq Composite and CHEMTRONICSCOLtd positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Kosdaq Composite position performs unexpectedly, CHEMTRONICSCOLtd 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 CHEMTRONICSCOLtd will offset losses from the drop in CHEMTRONICSCOLtd's long position.The idea behind Kosdaq Composite Index and CHEMTRONICSCOLtd 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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