Correlation Between Korea Electric and DukSan Neolux

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

Diversification Opportunities for Korea Electric and DukSan Neolux

-0.6

Correlation Coefficient

Korea Electric  DukSan Neolux

Excellent diversification

The 3 months correlation between Korea and DukSan is -0.6. Overlapping area represents the amount of risk that can be diversified away by holding Korea Electric Power and DukSan Neolux CoLtd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on DukSan Neolux CoLtd 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 DukSan Neolux. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of DukSan Neolux CoLtd has no effect on the direction of Korea Electric i.e., Korea Electric and DukSan Neolux go up and down completely randomly.

Pair Corralation between Korea Electric and DukSan Neolux

Assuming the 90 days trading horizon Korea Electric Power is expected to under-perform the DukSan Neolux. But the stock apears to be less risky and, when comparing its historical volatility, Korea Electric Power is 1.65 times less risky than DukSan Neolux. The stock trades about -0.06 of its potential returns per unit of risk. The DukSan Neolux CoLtd is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  2,730,000  in DukSan Neolux CoLtd on October 24, 2024 and sell it today you would earn a total of  265,000  from holding DukSan Neolux CoLtd or generate 9.71% return on investment over 90 days.

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

Korea Electric Power  vs.  DukSan Neolux CoLtd

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 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.

DukSan Neolux CoLtd

Risk-Adjusted Performance

4 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in DukSan Neolux CoLtd are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, DukSan Neolux sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Korea Electric and DukSan Neolux

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

The idea behind Korea Electric Power and DukSan Neolux 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.