Correlation Between Korea Electric and Booster Co

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

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

Diversification Opportunities for Korea Electric and Booster Co

0.33

Correlation Coefficient

Korea Electric  Booster Co

Weak diversification

The 3 months correlation between Korea and Booster is 0.33. Overlapping area represents the amount of risk that can be diversified away by holding Korea Electric Power and Booster Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Booster Co and Korea Electric 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 Electric Power are associated (or correlated) with Booster Co. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Booster Co has no effect on the direction of Korea Electric i.e., Korea Electric and Booster Co go up and down completely randomly.

Pair Corralation between Korea Electric and Booster Co

Assuming the 90 days trading horizon Korea Electric Power is expected to under-perform the Booster Co. In addition to that, Korea Electric is 2.34 times more volatile than Booster Co. It trades about -0.08 of its total potential returns per unit of risk. Booster Co is currently generating about -0.13 per unit of volatility. If you would invest  397,793  in Booster Co on December 2, 2024 and sell it today you would lose (27,793) from holding Booster Co or give up 6.99% of portfolio value over 90 days.

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

Korea Electric Power  vs.  Booster Co

Korea Electric Power

Risk-Adjusted Performance

Very Weak

Over the last 90 days Korea Electric Power has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Booster Co

Risk-Adjusted Performance

Very Weak

Over the last 90 days Booster Co has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Korea Electric and Booster Co

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

The idea behind Korea Electric Power and Booster 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.