Correlation Between Leaders Technology and Kolon Plastics

Can any of the company-specific risk be diversified away by investing in both Leaders Technology and Kolon Plastics 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 Leaders Technology and Kolon Plastics into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Leaders Technology Investment and Kolon Plastics, you can compare the effects of market volatilities on Leaders Technology and Kolon Plastics 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 Leaders Technology with a short position of Kolon Plastics. Check out your portfolio center. Please also check ongoing floating volatility patterns of Leaders Technology and Kolon Plastics.

Diversification Opportunities for Leaders Technology and Kolon Plastics

-0.67

Correlation Coefficient

Leaders Technology  Kolon Plastics

Excellent diversification

The 3 months correlation between Leaders and Kolon is -0.67. Overlapping area represents the amount of risk that can be diversified away by holding Leaders Technology Investment and Kolon Plastics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kolon Plastics and Leaders Technology 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 Leaders Technology Investment are associated (or correlated) with Kolon Plastics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kolon Plastics has no effect on the direction of Leaders Technology i.e., Leaders Technology and Kolon Plastics go up and down completely randomly.

Pair Corralation between Leaders Technology and Kolon Plastics

Assuming the 90 days trading horizon Leaders Technology Investment is expected to under-perform the Kolon Plastics. In addition to that, Leaders Technology is 3.03 times more volatile than Kolon Plastics. It trades about -0.01 of its total potential returns per unit of risk. Kolon Plastics is currently generating about 0.11 per unit of volatility. If you would invest  537,036  in Kolon Plastics on December 23, 2024 and sell it today you would earn a total of  60,964  from holding Kolon Plastics or generate 11.35% return on investment over 90 days.

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

Leaders Technology Investment  vs.  Kolon Plastics

Leaders Technology

Risk-Adjusted Performance

Very Weak

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

Kolon Plastics

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Kolon Plastics are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Kolon Plastics sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Leaders Technology and Kolon Plastics

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

The idea behind Leaders Technology Investment and Kolon Plastics 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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.