Correlation Between Iljin Materials and Korea Gas

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

By analyzing existing cross correlation between Iljin Materials Co and Korea Gas, you can compare the effects of market volatilities on Iljin Materials and Korea Gas 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 Iljin Materials with a short position of Korea Gas. Check out your portfolio center. Please also check ongoing floating volatility patterns of Iljin Materials and Korea Gas.

Diversification Opportunities for Iljin Materials and Korea Gas

0.25

Correlation Coefficient

Iljin Materials  Korea Gas

Modest diversification

The 3 months correlation between Iljin and Korea is 0.25. Overlapping area represents the amount of risk that can be diversified away by holding Iljin Materials Co and Korea Gas in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Korea Gas and Iljin Materials 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 Iljin Materials Co are associated (or correlated) with Korea Gas. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Korea Gas has no effect on the direction of Iljin Materials i.e., Iljin Materials and Korea Gas go up and down completely randomly.

Pair Corralation between Iljin Materials and Korea Gas

Assuming the 90 days trading horizon Iljin Materials Co is expected to generate 1.21 times more return on investment than Korea Gas. However, Iljin Materials is 1.21 times more volatile than Korea Gas. It trades about 0.07 of its potential returns per unit of risk. Korea Gas is currently generating about 0.06 per unit of risk. If you would invest  2,395,000  in Iljin Materials Co on December 4, 2024 and sell it today you would earn a total of  330,000  from holding Iljin Materials Co or generate 13.78% return on investment over 90 days.

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

Iljin Materials Co  vs.  Korea Gas

Iljin Materials

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Iljin Materials Co are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Iljin Materials sustained solid returns over the last few months and may actually be approaching a breakup point.

Korea Gas

Risk-Adjusted Performance

Very Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Korea Gas are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Korea Gas sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Iljin Materials and Korea Gas

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

The idea behind Iljin Materials Co and Korea Gas 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.