Correlation Between Industrial Bank and Keum Kang

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

By analyzing existing cross correlation between Industrial Bank and Keum Kang Steel, you can compare the effects of market volatilities on Industrial Bank and Keum Kang 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 Keum Kang. Check out your portfolio center. Please also check ongoing floating volatility patterns of Industrial Bank and Keum Kang.

Diversification Opportunities for Industrial Bank and Keum Kang

-0.44

Correlation Coefficient

Industrial Bank  Keum Kang

Very good diversification

The 3 months correlation between Industrial and Keum is -0.44. Overlapping area represents the amount of risk that can be diversified away by holding Industrial Bank and Keum Kang Steel in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Keum Kang Steel 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 Keum Kang. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Keum Kang Steel has no effect on the direction of Industrial Bank i.e., Industrial Bank and Keum Kang go up and down completely randomly.

Pair Corralation between Industrial Bank and Keum Kang

Assuming the 90 days trading horizon Industrial Bank is expected to generate 0.51 times more return on investment than Keum Kang. However, Industrial Bank is 1.97 times less risky than Keum Kang. It trades about 0.09 of its potential returns per unit of risk. Keum Kang Steel is currently generating about -0.03 per unit of risk. If you would invest  942,803  in Industrial Bank on August 31, 2024 and sell it today you would earn a total of  566,197  from holding Industrial Bank or generate 60.05% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	99.78%
Values	Daily Returns

Industrial Bank  vs.  Keum Kang Steel

Industrial Bank

Risk-Adjusted Performance

9 of 100

OK

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.

Keum Kang Steel

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Keum Kang Steel 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 Keum Kang

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

The idea behind Industrial Bank and Keum Kang Steel 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.

Check out your portfolio center.

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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.