Correlation Between Kumho Petro and Seoul Electronics

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

By analyzing existing cross correlation between Kumho Petro Chemical and Seoul Electronics Telecom, you can compare the effects of market volatilities on Kumho Petro and Seoul Electronics 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 Kumho Petro with a short position of Seoul Electronics. Check out your portfolio center. Please also check ongoing floating volatility patterns of Kumho Petro and Seoul Electronics.

Diversification Opportunities for Kumho Petro and Seoul Electronics

0.18

Correlation Coefficient

Kumho Petro  Seoul Electronics

Average diversification

The 3 months correlation between Kumho and Seoul is 0.18. Overlapping area represents the amount of risk that can be diversified away by holding Kumho Petro Chemical and Seoul Electronics Telecom in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Seoul Electronics Telecom and Kumho Petro 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 Kumho Petro Chemical are associated (or correlated) with Seoul Electronics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Seoul Electronics Telecom has no effect on the direction of Kumho Petro i.e., Kumho Petro and Seoul Electronics go up and down completely randomly.

Pair Corralation between Kumho Petro and Seoul Electronics

Assuming the 90 days trading horizon Kumho Petro is expected to generate 15.5 times less return on investment than Seoul Electronics. But when comparing it to its historical volatility, Kumho Petro Chemical is 2.29 times less risky than Seoul Electronics. It trades about 0.0 of its potential returns per unit of risk. Seoul Electronics Telecom is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  24,100  in Seoul Electronics Telecom on December 2, 2024 and sell it today you would earn a total of  600.00  from holding Seoul Electronics Telecom or generate 2.49% return on investment over 90 days.

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

Kumho Petro Chemical  vs.  Seoul Electronics Telecom

Kumho Petro Chemical

Risk-Adjusted Performance

Very Weak

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

Seoul Electronics Telecom

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Seoul Electronics Telecom are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Seoul Electronics may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Kumho Petro and Seoul Electronics

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

The idea behind Kumho Petro Chemical and Seoul Electronics Telecom 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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.