Correlation Between Industrial Bank and Kumho Ind

Can any of the company-specific risk be diversified away by investing in both Industrial Bank and Kumho Ind 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 Industrial Bank and Kumho Ind into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Industrial Bank and Kumho Ind, you can compare the effects of market volatilities on Industrial Bank and Kumho Ind 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 Industrial Bank with a short position of Kumho Ind. Check out your portfolio center. Please also check ongoing floating volatility patterns of Industrial Bank and Kumho Ind.

Diversification Opportunities for Industrial Bank and Kumho Ind

-0.61

Correlation Coefficient

Industrial Bank  Kumho Ind

Excellent diversification

The 3 months correlation between Industrial and Kumho is -0.61. Overlapping area represents the amount of risk that can be diversified away by holding Industrial Bank and Kumho Ind in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kumho Ind and Industrial Bank 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 Industrial Bank are associated (or correlated) with Kumho Ind. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kumho Ind has no effect on the direction of Industrial Bank i.e., Industrial Bank and Kumho Ind go up and down completely randomly.

Pair Corralation between Industrial Bank and Kumho Ind

Assuming the 90 days trading horizon Industrial Bank is expected to generate 0.31 times more return on investment than Kumho Ind. However, Industrial Bank is 3.27 times less risky than Kumho Ind. It trades about 0.19 of its potential returns per unit of risk. Kumho Ind is currently generating about 0.03 per unit of risk. If you would invest  1,446,000  in Industrial Bank on August 31, 2024 and sell it today you would earn a total of  63,000  from holding Industrial Bank or generate 4.36% return on investment over 90 days.

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

Industrial Bank  vs.  Kumho Ind

Industrial Bank

Risk-Adjusted Performance

9 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Industrial Bank are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Industrial Bank may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Kumho Ind

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Kumho Ind has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in December 2024. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Industrial Bank and Kumho Ind

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

The idea behind Industrial Bank and Kumho Ind 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.