Correlation Between Ni Steel and Kukdong Oil

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

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

Diversification Opportunities for Ni Steel and Kukdong Oil

-0.15

Correlation Coefficient

Ni Steel  Kukdong Oil

Good diversification

The 3 months correlation between 008260 and Kukdong is -0.15. Overlapping area represents the amount of risk that can be diversified away by holding Ni Steel and Kukdong Oil Chemicals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kukdong Oil Chemicals and Ni 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 Ni Steel are associated (or correlated) with Kukdong Oil. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kukdong Oil Chemicals has no effect on the direction of Ni Steel i.e., Ni Steel and Kukdong Oil go up and down completely randomly.

Pair Corralation between Ni Steel and Kukdong Oil

Assuming the 90 days trading horizon Ni Steel is expected to under-perform the Kukdong Oil. In addition to that, Ni Steel is 3.07 times more volatile than Kukdong Oil Chemicals. It trades about -0.28 of its total potential returns per unit of risk. Kukdong Oil Chemicals is currently generating about -0.14 per unit of volatility. If you would invest  349,500  in Kukdong Oil Chemicals on November 19, 2024 and sell it today you would lose (4,500) from holding Kukdong Oil Chemicals or give up 1.29% of portfolio value over 90 days.

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

Ni Steel  vs.  Kukdong Oil Chemicals

Ni Steel

Risk-Adjusted Performance

Very Weak

Over the last 90 days Ni Steel 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 March 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Kukdong Oil Chemicals

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Kukdong Oil Chemicals are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Kukdong Oil is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Ni Steel and Kukdong Oil

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

The idea behind Ni Steel and Kukdong Oil Chemicals 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.

Check out your portfolio center.

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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.