Correlation Between Korea Shipbuilding and Jeju Bank

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

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

Diversification Opportunities for Korea Shipbuilding and Jeju Bank

-0.33

Correlation Coefficient

Korea Shipbuilding  Jeju Bank

Very good diversification

The 3 months correlation between Korea and Jeju is -0.33. Overlapping area represents the amount of risk that can be diversified away by holding Korea Shipbuilding Offshore and Jeju Bank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Jeju Bank and Korea Shipbuilding 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 Shipbuilding Offshore 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 Korea Shipbuilding i.e., Korea Shipbuilding and Jeju Bank go up and down completely randomly.

Pair Corralation between Korea Shipbuilding and Jeju Bank

Assuming the 90 days trading horizon Korea Shipbuilding Offshore is expected to generate 0.54 times more return on investment than Jeju Bank. However, Korea Shipbuilding Offshore is 1.84 times less risky than Jeju Bank. It trades about 0.1 of its potential returns per unit of risk. Jeju Bank is currently generating about 0.01 per unit of risk. If you would invest  7,600,000  in Korea Shipbuilding Offshore on October 3, 2024 and sell it today you would earn a total of  15,200,000  from holding Korea Shipbuilding Offshore or generate 200.0% return on investment over 90 days.

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

Korea Shipbuilding Offshore  vs.  Jeju Bank

Korea Shipbuilding

Risk-Adjusted Performance

10 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Korea Shipbuilding Offshore are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Korea Shipbuilding sustained solid returns over the last few months and may actually be approaching a breakup point.

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 Korea Shipbuilding and Jeju Bank

The main advantage of trading using opposite Korea Shipbuilding and Jeju Bank positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Korea Shipbuilding 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 Korea Shipbuilding Offshore 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 Portfolio Anywhere module to track or share privately all of your investments from the convenience of any device.