Correlation Between Mirae Asset and KBSTAR HealthCare

Can any of the company-specific risk be diversified away by investing in both Mirae Asset and KBSTAR HealthCare 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 Mirae Asset and KBSTAR HealthCare into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Mirae Asset Daewoo and KBSTAR HealthCare Fixed, you can compare the effects of market volatilities on Mirae Asset and KBSTAR HealthCare 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 Mirae Asset with a short position of KBSTAR HealthCare. Check out your portfolio center. Please also check ongoing floating volatility patterns of Mirae Asset and KBSTAR HealthCare.

Diversification Opportunities for Mirae Asset and KBSTAR HealthCare

-0.51

Correlation Coefficient

Mirae Asset  KBSTAR HealthCare

Excellent diversification

The 3 months correlation between Mirae and KBSTAR is -0.51. Overlapping area represents the amount of risk that can be diversified away by holding Mirae Asset Daewoo and KBSTAR HealthCare Fixed in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on KBSTAR HealthCare Fixed and Mirae Asset 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 Mirae Asset Daewoo are associated (or correlated) with KBSTAR HealthCare. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of KBSTAR HealthCare Fixed has no effect on the direction of Mirae Asset i.e., Mirae Asset and KBSTAR HealthCare go up and down completely randomly.

Pair Corralation between Mirae Asset and KBSTAR HealthCare

Assuming the 90 days trading horizon Mirae Asset Daewoo is expected to generate 6.38 times more return on investment than KBSTAR HealthCare. However, Mirae Asset is 6.38 times more volatile than KBSTAR HealthCare Fixed. It trades about 0.05 of its potential returns per unit of risk. KBSTAR HealthCare Fixed is currently generating about -0.03 per unit of risk. If you would invest  416,000  in Mirae Asset Daewoo on September 4, 2024 and sell it today you would earn a total of  36,000  from holding Mirae Asset Daewoo or generate 8.65% return on investment over 90 days.

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

Mirae Asset Daewoo  vs.  KBSTAR HealthCare Fixed

Mirae Asset Daewoo

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Mirae Asset Daewoo are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Mirae Asset sustained solid returns over the last few months and may actually be approaching a breakup point.

KBSTAR HealthCare Fixed

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Mirae Asset and KBSTAR HealthCare

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

The idea behind Mirae Asset Daewoo and KBSTAR HealthCare Fixed 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.