Correlation Between Jeju Bank and Korean Reinsurance

Can any of the company-specific risk be diversified away by investing in both Jeju Bank and Korean Reinsurance 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 Jeju Bank and Korean Reinsurance into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Jeju Bank and Korean Reinsurance Co, you can compare the effects of market volatilities on Jeju Bank and Korean Reinsurance 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 Jeju Bank with a short position of Korean Reinsurance. Check out your portfolio center. Please also check ongoing floating volatility patterns of Jeju Bank and Korean Reinsurance.

Diversification Opportunities for Jeju Bank and Korean Reinsurance

-0.75

Correlation Coefficient

Jeju Bank  Korean Reinsurance

Pay attention - limited upside

The 3 months correlation between Jeju and Korean is -0.75. Overlapping area represents the amount of risk that can be diversified away by holding Jeju Bank and Korean Reinsurance Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Korean Reinsurance and Jeju Bank 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 Jeju Bank are associated (or correlated) with Korean Reinsurance. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Korean Reinsurance has no effect on the direction of Jeju Bank i.e., Jeju Bank and Korean Reinsurance go up and down completely randomly.

Pair Corralation between Jeju Bank and Korean Reinsurance

Assuming the 90 days trading horizon Jeju Bank is expected to generate 2.4 times less return on investment than Korean Reinsurance. In addition to that, Jeju Bank is 2.99 times more volatile than Korean Reinsurance Co. It trades about 0.02 of its total potential returns per unit of risk. Korean Reinsurance Co is currently generating about 0.11 per unit of volatility. If you would invest  557,208  in Korean Reinsurance Co on September 14, 2024 and sell it today you would earn a total of  259,792  from holding Korean Reinsurance Co or generate 46.62% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

Jeju Bank  vs.  Korean Reinsurance Co

Jeju Bank

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Jeju Bank has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Korean Reinsurance

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Korean Reinsurance Co are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Korean Reinsurance sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Jeju Bank and Korean Reinsurance

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

The idea behind Jeju Bank and Korean Reinsurance Co 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..