Correlation Between Korea Steel and FoodNamoo

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

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

Diversification Opportunities for Korea Steel and FoodNamoo

0.52

Correlation Coefficient

Korea Steel  FoodNamoo

Very weak diversification

The 3 months correlation between Korea and FoodNamoo is 0.52. Overlapping area represents the amount of risk that can be diversified away by holding Korea Steel Co and FoodNamoo in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FoodNamoo and Korea Steel 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 Steel Co are associated (or correlated) with FoodNamoo. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of FoodNamoo has no effect on the direction of Korea Steel i.e., Korea Steel and FoodNamoo go up and down completely randomly.

Pair Corralation between Korea Steel and FoodNamoo

Assuming the 90 days trading horizon Korea Steel Co is expected to under-perform the FoodNamoo. But the stock apears to be less risky and, when comparing its historical volatility, Korea Steel Co is 2.65 times less risky than FoodNamoo. The stock trades about -0.02 of its potential returns per unit of risk. The FoodNamoo is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  323,500  in FoodNamoo on September 21, 2024 and sell it today you would lose (26,000) from holding FoodNamoo or give up 8.04% of portfolio value over 90 days.

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

Korea Steel Co  vs.  FoodNamoo

Korea Steel

Risk-Adjusted Performance

0 of 100

Very Weak

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

FoodNamoo

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days FoodNamoo has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, FoodNamoo 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 Steel and FoodNamoo

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

The idea behind Korea Steel Co and FoodNamoo 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 CEOs Directory module to screen CEOs from public companies around the world.