Correlation Between Kukdong Oil and Humax Holdings

Can any of the company-specific risk be diversified away by investing in both Kukdong Oil and Humax Holdings 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 Humax Holdings 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 Humax Holdings Co, you can compare the effects of market volatilities on Kukdong Oil and Humax Holdings 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 Humax Holdings. Check out your portfolio center. Please also check ongoing floating volatility patterns of Kukdong Oil and Humax Holdings.

Diversification Opportunities for Kukdong Oil and Humax Holdings

0.55

Correlation Coefficient

Kukdong Oil  Humax Holdings

Very weak diversification

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

Pair Corralation between Kukdong Oil and Humax Holdings

Assuming the 90 days trading horizon Kukdong Oil is expected to generate 23.32 times less return on investment than Humax Holdings. But when comparing it to its historical volatility, Kukdong Oil Chemicals is 10.61 times less risky than Humax Holdings. It trades about 0.11 of its potential returns per unit of risk. Humax Holdings Co is currently generating about 0.24 of returns per unit of risk over similar time horizon. If you would invest  258,000  in Humax Holdings Co on October 24, 2024 and sell it today you would earn a total of  103,500  from holding Humax Holdings Co or generate 40.12% return on investment over 90 days.

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

Kukdong Oil Chemicals  vs.  Humax Holdings 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.

Humax Holdings

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Humax Holdings Co are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Humax Holdings sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Kukdong Oil and Humax Holdings

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

The idea behind Kukdong Oil Chemicals and Humax Holdings 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.

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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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.