Correlation Between Korea Refract and KM

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

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

Diversification Opportunities for Korea Refract and KM

0.55

Correlation Coefficient

Korea Refract  KM

Very weak diversification

The 3 months correlation between Korea and KM is 0.55. Overlapping area represents the amount of risk that can be diversified away by holding Korea Refract and KM Corp. in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on KM Corporation and Korea Refract 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 Refract are associated (or correlated) with KM. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of KM Corporation has no effect on the direction of Korea Refract i.e., Korea Refract and KM go up and down completely randomly.

Pair Corralation between Korea Refract and KM

Assuming the 90 days trading horizon Korea Refract is expected to under-perform the KM. But the stock apears to be less risky and, when comparing its historical volatility, Korea Refract is 2.15 times less risky than KM. The stock trades about -0.01 of its potential returns per unit of risk. The KM Corporation is currently generating about 0.0 of returns per unit of risk over similar time horizon. If you would invest  299,500  in KM Corporation on December 30, 2024 and sell it today you would lose (5,500) from holding KM Corporation or give up 1.84% of portfolio value over 90 days.

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

Korea Refract  vs.  KM Corp.

Korea Refract

Risk-Adjusted Performance

Very Weak

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

KM Corporation

Risk-Adjusted Performance

Very Weak

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

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

The idea behind Korea Refract and KM Corporation 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.