Correlation Between Kyung Chang and Kumho Petro

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

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

Diversification Opportunities for Kyung Chang and Kumho Petro

-0.64

Correlation Coefficient

Kyung Chang  Kumho Petro

Excellent diversification

The 3 months correlation between Kyung and Kumho is -0.64. Overlapping area represents the amount of risk that can be diversified away by holding Kyung Chang Industrial and Kumho Petro Chemical in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kumho Petro Chemical and Kyung Chang 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 Kyung Chang Industrial are associated (or correlated) with Kumho Petro. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kumho Petro Chemical has no effect on the direction of Kyung Chang i.e., Kyung Chang and Kumho Petro go up and down completely randomly.

Pair Corralation between Kyung Chang and Kumho Petro

Assuming the 90 days trading horizon Kyung Chang Industrial is expected to under-perform the Kumho Petro. But the stock apears to be less risky and, when comparing its historical volatility, Kyung Chang Industrial is 1.14 times less risky than Kumho Petro. The stock trades about -0.07 of its potential returns per unit of risk. The Kumho Petro Chemical is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  4,805,891  in Kumho Petro Chemical on December 23, 2024 and sell it today you would earn a total of  444,109  from holding Kumho Petro Chemical or generate 9.24% return on investment over 90 days.

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

Kyung Chang Industrial  vs.  Kumho Petro Chemical

Kyung Chang Industrial

Risk-Adjusted Performance

Very Weak

Over the last 90 days Kyung Chang Industrial has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Kumho Petro Chemical

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Kumho Petro Chemical are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Kumho Petro may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Kyung Chang and Kumho Petro

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

The idea behind Kyung Chang Industrial and Kumho Petro Chemical 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.