Correlation Between KCC Engineering and Daewoo Electronic

Can any of the company-specific risk be diversified away by investing in both KCC Engineering and Daewoo Electronic 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 KCC Engineering and Daewoo Electronic into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between KCC Engineering Construction and Daewoo Electronic Components, you can compare the effects of market volatilities on KCC Engineering and Daewoo Electronic 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 KCC Engineering with a short position of Daewoo Electronic. Check out your portfolio center. Please also check ongoing floating volatility patterns of KCC Engineering and Daewoo Electronic.

Diversification Opportunities for KCC Engineering and Daewoo Electronic

0.33

Correlation Coefficient

KCC Engineering  Daewoo Electronic

Weak diversification

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

Pair Corralation between KCC Engineering and Daewoo Electronic

Assuming the 90 days trading horizon KCC Engineering Construction is expected to under-perform the Daewoo Electronic. In addition to that, KCC Engineering is 1.5 times more volatile than Daewoo Electronic Components. It trades about -0.03 of its total potential returns per unit of risk. Daewoo Electronic Components is currently generating about 0.01 per unit of volatility. If you would invest  100,400  in Daewoo Electronic Components on December 21, 2024 and sell it today you would earn a total of  300.00  from holding Daewoo Electronic Components or generate 0.3% return on investment over 90 days.

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

KCC Engineering Construction  vs.  Daewoo Electronic Components

KCC Engineering Cons

Risk-Adjusted Performance

Very Weak

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

Daewoo Electronic

Risk-Adjusted Performance

Weak

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

Pair Trading with KCC Engineering and Daewoo Electronic

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

The idea behind KCC Engineering Construction and Daewoo Electronic Components 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.