Correlation Between Korea Alcohol and Golden Bridge

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

By analyzing existing cross correlation between Korea Alcohol Industrial and Golden Bridge Investment, you can compare the effects of market volatilities on Korea Alcohol and Golden Bridge 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 Alcohol with a short position of Golden Bridge. Check out your portfolio center. Please also check ongoing floating volatility patterns of Korea Alcohol and Golden Bridge.

Diversification Opportunities for Korea Alcohol and Golden Bridge

0.33

Correlation Coefficient

Korea Alcohol  Golden Bridge

Weak diversification

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

Pair Corralation between Korea Alcohol and Golden Bridge

Assuming the 90 days trading horizon Korea Alcohol Industrial is expected to generate 0.86 times more return on investment than Golden Bridge. However, Korea Alcohol Industrial is 1.16 times less risky than Golden Bridge. It trades about 0.09 of its potential returns per unit of risk. Golden Bridge Investment is currently generating about -0.08 per unit of risk. If you would invest  848,000  in Korea Alcohol Industrial on November 29, 2024 and sell it today you would earn a total of  14,000  from holding Korea Alcohol Industrial or generate 1.65% return on investment over 90 days.

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

Korea Alcohol Industrial  vs.  Golden Bridge Investment

Korea Alcohol Industrial

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Korea Alcohol Industrial are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Korea Alcohol is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Golden Bridge Investment

Risk-Adjusted Performance

Very Weak

Over the last 90 days Golden Bridge Investment has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Golden Bridge is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Korea Alcohol and Golden Bridge

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

The idea behind Korea Alcohol Industrial and Golden Bridge Investment 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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..