Correlation Between Kukdong Oil and Cheryong Industrial

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

Diversification Opportunities for Kukdong Oil and Cheryong Industrial

0.61

Correlation Coefficient

Kukdong Oil  Cheryong Industrial

Poor diversification

The 3 months correlation between Kukdong and Cheryong is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding Kukdong Oil Chemicals and Cheryong Industrial CoLtd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cheryong Industrial CoLtd 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 Cheryong Industrial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cheryong Industrial CoLtd has no effect on the direction of Kukdong Oil i.e., Kukdong Oil and Cheryong Industrial go up and down completely randomly.

Pair Corralation between Kukdong Oil and Cheryong Industrial

Assuming the 90 days trading horizon Kukdong Oil Chemicals is expected to under-perform the Cheryong Industrial. But the stock apears to be less risky and, when comparing its historical volatility, Kukdong Oil Chemicals is 3.58 times less risky than Cheryong Industrial. The stock trades about -0.03 of its potential returns per unit of risk. The Cheryong Industrial CoLtd is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  608,049  in Cheryong Industrial CoLtd on October 22, 2024 and sell it today you would earn a total of  122,951  from holding Cheryong Industrial CoLtd or generate 20.22% return on investment over 90 days.

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

Kukdong Oil Chemicals  vs.  Cheryong Industrial CoLtd

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.

Cheryong Industrial CoLtd

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Cheryong Industrial CoLtd are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Cheryong Industrial sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Kukdong Oil and Cheryong Industrial

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

The idea behind Kukdong Oil Chemicals and Cheryong Industrial CoLtd 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 Global Correlations module to find global opportunities by holding instruments from different markets.