Correlation Between GS Retail and Jeju Bank

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

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

Diversification Opportunities for GS Retail and Jeju Bank

0.2

Correlation Coefficient

GS Retail  Jeju Bank

Modest diversification

The 3 months correlation between 007070 and Jeju is 0.2. Overlapping area represents the amount of risk that can be diversified away by holding GS Retail Co and Jeju Bank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Jeju Bank and GS Retail 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 GS Retail Co are associated (or correlated) with Jeju Bank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Jeju Bank has no effect on the direction of GS Retail i.e., GS Retail and Jeju Bank go up and down completely randomly.

Pair Corralation between GS Retail and Jeju Bank

Assuming the 90 days trading horizon GS Retail Co is expected to under-perform the Jeju Bank. But the stock apears to be less risky and, when comparing its historical volatility, GS Retail Co is 2.38 times less risky than Jeju Bank. The stock trades about -0.04 of its potential returns per unit of risk. The Jeju Bank is currently generating about 0.0 of returns per unit of risk over similar time horizon. If you would invest  1,279,705  in Jeju Bank on October 11, 2024 and sell it today you would lose (450,705) from holding Jeju Bank or give up 35.22% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	96.46%
Values	Daily Returns

GS Retail Co  vs.  Jeju Bank

GS Retail

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days GS Retail Co 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 February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

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 somewhat strong basic indicators, Jeju Bank is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with GS Retail and Jeju Bank

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

The idea behind GS Retail Co and Jeju Bank 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.