Correlation Between Korea Electric and Synopex

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

Diversification Opportunities for Korea Electric and Synopex

-0.4

Correlation Coefficient

Korea Electric  Synopex

Very good diversification

The 3 months correlation between Korea and Synopex is -0.4. Overlapping area represents the amount of risk that can be diversified away by holding Korea Electric Power and Synopex in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Synopex 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 Synopex. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Synopex has no effect on the direction of Korea Electric i.e., Korea Electric and Synopex go up and down completely randomly.

Pair Corralation between Korea Electric and Synopex

Assuming the 90 days trading horizon Korea Electric is expected to generate 14.5 times less return on investment than Synopex. But when comparing it to its historical volatility, Korea Electric Power is 2.49 times less risky than Synopex. It trades about 0.01 of its potential returns per unit of risk. Synopex is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  310,657  in Synopex on October 4, 2024 and sell it today you would earn a total of  282,343  from holding Synopex or generate 90.89% return on investment over 90 days.

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

Korea Electric Power  vs.  Synopex

Korea Electric Power

Risk-Adjusted Performance

0 of 100

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 somewhat strong basic indicators, Korea Electric is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Synopex

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Synopex 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 Synopex

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

The idea behind Korea Electric Power and Synopex 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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.