Correlation Between Korea Alcohol and Aprogen KIC

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

Diversification Opportunities for Korea Alcohol and Aprogen KIC

-0.55

Correlation Coefficient

Korea Alcohol  Aprogen KIC

Excellent diversification

The 3 months correlation between Korea and Aprogen is -0.55. Overlapping area represents the amount of risk that can be diversified away by holding Korea Alcohol Industrial and Aprogen KIC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aprogen KIC 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 Aprogen KIC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aprogen KIC has no effect on the direction of Korea Alcohol i.e., Korea Alcohol and Aprogen KIC go up and down completely randomly.

Pair Corralation between Korea Alcohol and Aprogen KIC

Assuming the 90 days trading horizon Korea Alcohol Industrial is expected to generate 0.36 times more return on investment than Aprogen KIC. However, Korea Alcohol Industrial is 2.81 times less risky than Aprogen KIC. It trades about 0.24 of its potential returns per unit of risk. Aprogen KIC is currently generating about -0.02 per unit of risk. If you would invest  805,636  in Korea Alcohol Industrial on December 24, 2024 and sell it today you would earn a total of  113,364  from holding Korea Alcohol Industrial or generate 14.07% return on investment over 90 days.

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

Korea Alcohol Industrial  vs.  Aprogen KIC

Korea Alcohol Industrial

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Korea Alcohol Industrial are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Korea Alcohol sustained solid returns over the last few months and may actually be approaching a breakup point.

Aprogen KIC

Risk-Adjusted Performance

Very Weak

Over the last 90 days Aprogen KIC has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Aprogen KIC 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 Aprogen KIC

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

The idea behind Korea Alcohol Industrial and Aprogen KIC 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.