Correlation Between Korea Shipbuilding and Keyang Electric

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

Diversification Opportunities for Korea Shipbuilding and Keyang Electric

0.79

Correlation Coefficient

Korea Shipbuilding  Keyang Electric

Poor diversification

The 3 months correlation between Korea and Keyang is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding Korea Shipbuilding Offshore and Keyang Electric Machinery in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Keyang Electric Machinery 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 Keyang Electric. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Keyang Electric Machinery has no effect on the direction of Korea Shipbuilding i.e., Korea Shipbuilding and Keyang Electric go up and down completely randomly.

Pair Corralation between Korea Shipbuilding and Keyang Electric

Assuming the 90 days trading horizon Korea Shipbuilding Offshore is expected to generate 1.14 times more return on investment than Keyang Electric. However, Korea Shipbuilding is 1.14 times more volatile than Keyang Electric Machinery. It trades about 0.08 of its potential returns per unit of risk. Keyang Electric Machinery is currently generating about 0.06 per unit of risk. If you would invest  19,053,000  in Korea Shipbuilding Offshore on December 4, 2024 and sell it today you would earn a total of  2,347,000  from holding Korea Shipbuilding Offshore or generate 12.32% return on investment over 90 days.

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

Korea Shipbuilding Offshore  vs.  Keyang Electric Machinery

Korea Shipbuilding

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Korea Shipbuilding Offshore are ranked lower than 6 (%) 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.

Keyang Electric Machinery

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Keyang Electric Machinery are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Keyang Electric may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Korea Shipbuilding and Keyang Electric

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

The idea behind Korea Shipbuilding Offshore and Keyang Electric Machinery 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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.