Correlation Between GS Retail and Korea Refractories

Can any of the company-specific risk be diversified away by investing in both GS Retail and Korea Refractories 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 Korea Refractories 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 Korea Refractories Co, you can compare the effects of market volatilities on GS Retail and Korea Refractories 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 Korea Refractories. Check out your portfolio center. Please also check ongoing floating volatility patterns of GS Retail and Korea Refractories.

Diversification Opportunities for GS Retail and Korea Refractories

-0.34

Correlation Coefficient

GS Retail  Korea Refractories

Very good diversification

The 3 months correlation between 007070 and Korea is -0.34. Overlapping area represents the amount of risk that can be diversified away by holding GS Retail Co and Korea Refractories Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Korea Refractories 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 Korea Refractories. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Korea Refractories has no effect on the direction of GS Retail i.e., GS Retail and Korea Refractories go up and down completely randomly.

Pair Corralation between GS Retail and Korea Refractories

Assuming the 90 days trading horizon GS Retail Co is expected to under-perform the Korea Refractories. In addition to that, GS Retail is 1.73 times more volatile than Korea Refractories Co. It trades about -0.15 of its total potential returns per unit of risk. Korea Refractories Co is currently generating about 0.05 per unit of volatility. If you would invest  216,438  in Korea Refractories Co on October 23, 2024 and sell it today you would earn a total of  10,062  from holding Korea Refractories Co or generate 4.65% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	70.97%
Values	Daily Returns

GS Retail Co  vs.  Korea Refractories Co

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.

Korea Refractories

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Korea Refractories Co are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Korea Refractories 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 Korea Refractories

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

The idea behind GS Retail Co and Korea Refractories 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 Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.