Correlation Between Korea Line and Haitai Confectionery

Can any of the company-specific risk be diversified away by investing in both Korea Line and Haitai Confectionery 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 Line and Haitai Confectionery into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Korea Line and Haitai Confectionery Foods, you can compare the effects of market volatilities on Korea Line and Haitai Confectionery 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 Line with a short position of Haitai Confectionery. Check out your portfolio center. Please also check ongoing floating volatility patterns of Korea Line and Haitai Confectionery.

Diversification Opportunities for Korea Line and Haitai Confectionery

-0.11

Correlation Coefficient

Korea Line  Haitai Confectionery

Good diversification

The 3 months correlation between Korea and Haitai is -0.11. Overlapping area represents the amount of risk that can be diversified away by holding Korea Line and Haitai Confectionery Foods in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Haitai Confectionery and Korea Line 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 Line are associated (or correlated) with Haitai Confectionery. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Haitai Confectionery has no effect on the direction of Korea Line i.e., Korea Line and Haitai Confectionery go up and down completely randomly.

Pair Corralation between Korea Line and Haitai Confectionery

Assuming the 90 days trading horizon Korea Line is expected to generate 1.06 times more return on investment than Haitai Confectionery. However, Korea Line is 1.06 times more volatile than Haitai Confectionery Foods. It trades about 0.07 of its potential returns per unit of risk. Haitai Confectionery Foods is currently generating about -0.23 per unit of risk. If you would invest  170,500  in Korea Line on October 23, 2024 and sell it today you would earn a total of  2,800  from holding Korea Line or generate 1.64% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	94.74%
Values	Daily Returns

Korea Line  vs.  Haitai Confectionery Foods

Korea Line

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Korea Line has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Korea Line is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Haitai Confectionery

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Haitai Confectionery Foods are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Haitai Confectionery is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Korea Line and Haitai Confectionery

The main advantage of trading using opposite Korea Line and Haitai Confectionery positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Korea Line position performs unexpectedly, Haitai Confectionery 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 Haitai Confectionery will offset losses from the drop in Haitai Confectionery's long position.

The idea behind Korea Line and Haitai Confectionery Foods 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.