Correlation Between KCC Engineering and CJ Cheiljedang

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

Diversification Opportunities for KCC Engineering and CJ Cheiljedang

0.38

Correlation Coefficient

KCC Engineering  CJ Cheiljedang

Weak diversification

The 3 months correlation between KCC and 097950 is 0.38. Overlapping area represents the amount of risk that can be diversified away by holding KCC Engineering Construction and CJ Cheiljedang in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CJ Cheiljedang 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 CJ Cheiljedang. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CJ Cheiljedang has no effect on the direction of KCC Engineering i.e., KCC Engineering and CJ Cheiljedang go up and down completely randomly.

Pair Corralation between KCC Engineering and CJ Cheiljedang

Assuming the 90 days trading horizon KCC Engineering Construction is expected to under-perform the CJ Cheiljedang. But the stock apears to be less risky and, when comparing its historical volatility, KCC Engineering Construction is 1.72 times less risky than CJ Cheiljedang. The stock trades about -0.03 of its potential returns per unit of risk. The CJ Cheiljedang is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  26,178,800  in CJ Cheiljedang on December 22, 2024 and sell it today you would earn a total of  671,200  from holding CJ Cheiljedang or generate 2.56% 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.  CJ Cheiljedang

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.

CJ Cheiljedang

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in CJ Cheiljedang are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, CJ Cheiljedang 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 CJ Cheiljedang

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

The idea behind KCC Engineering Construction and CJ Cheiljedang 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.