Correlation Between Korea Shipbuilding and EBEST Investment

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

Diversification Opportunities for Korea Shipbuilding and EBEST Investment

-0.24

Correlation Coefficient

Korea Shipbuilding  EBEST Investment

Very good diversification

The 3 months correlation between Korea and EBEST is -0.24. Overlapping area represents the amount of risk that can be diversified away by holding Korea Shipbuilding Offshore and EBEST Investment Securities in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on EBEST Investment Sec 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 EBEST Investment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of EBEST Investment Sec has no effect on the direction of Korea Shipbuilding i.e., Korea Shipbuilding and EBEST Investment go up and down completely randomly.

Pair Corralation between Korea Shipbuilding and EBEST Investment

Assuming the 90 days trading horizon Korea Shipbuilding Offshore is expected to under-perform the EBEST Investment. In addition to that, Korea Shipbuilding is 2.95 times more volatile than EBEST Investment Securities. It trades about -0.06 of its total potential returns per unit of risk. EBEST Investment Securities is currently generating about -0.01 per unit of volatility. If you would invest  399,000  in EBEST Investment Securities on December 2, 2024 and sell it today you would lose (1,000.00) from holding EBEST Investment Securities or give up 0.25% of portfolio value over 90 days.

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

Korea Shipbuilding Offshore  vs.  EBEST Investment Securities

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.

EBEST Investment Sec

Risk-Adjusted Performance

Very Weak

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

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

The idea behind Korea Shipbuilding Offshore and EBEST Investment Securities 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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.