Correlation Between Kukdong Oil and BooKook Steel

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

By analyzing existing cross correlation between Kukdong Oil Chemicals and BooKook Steel Co, you can compare the effects of market volatilities on Kukdong Oil and BooKook Steel 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 Kukdong Oil with a short position of BooKook Steel. Check out your portfolio center. Please also check ongoing floating volatility patterns of Kukdong Oil and BooKook Steel.

Diversification Opportunities for Kukdong Oil and BooKook Steel

0.91

Correlation Coefficient

Kukdong Oil  BooKook Steel

Almost no diversification

The 3 months correlation between Kukdong and BooKook is 0.91. Overlapping area represents the amount of risk that can be diversified away by holding Kukdong Oil Chemicals and BooKook Steel Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BooKook Steel and Kukdong Oil 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 Kukdong Oil Chemicals are associated (or correlated) with BooKook Steel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BooKook Steel has no effect on the direction of Kukdong Oil i.e., Kukdong Oil and BooKook Steel go up and down completely randomly.

Pair Corralation between Kukdong Oil and BooKook Steel

Assuming the 90 days trading horizon Kukdong Oil is expected to generate 1.2 times less return on investment than BooKook Steel. But when comparing it to its historical volatility, Kukdong Oil Chemicals is 1.43 times less risky than BooKook Steel. It trades about 0.4 of its potential returns per unit of risk. BooKook Steel Co is currently generating about 0.33 of returns per unit of risk over similar time horizon. If you would invest  208,550  in BooKook Steel Co on October 10, 2024 and sell it today you would earn a total of  31,450  from holding BooKook Steel Co or generate 15.08% return on investment over 90 days.

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

Kukdong Oil Chemicals  vs.  BooKook Steel Co

Kukdong Oil Chemicals

Risk-Adjusted Performance

0 of 100

Very Weak

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

BooKook Steel

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Kukdong Oil and BooKook Steel

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

The idea behind Kukdong Oil Chemicals and BooKook Steel Co 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.