Correlation Between Kyung Chang and Global Standard

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

Diversification Opportunities for Kyung Chang and Global Standard

0.62
  Correlation Coefficient

Poor diversification

The 3 months correlation between Kyung and Global is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding Kyung Chang Industrial and Global Standard Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Global Standard Tech 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 Global Standard. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Global Standard Tech has no effect on the direction of Kyung Chang i.e., Kyung Chang and Global Standard go up and down completely randomly.

Pair Corralation between Kyung Chang and Global Standard

Assuming the 90 days trading horizon Kyung Chang Industrial is expected to under-perform the Global Standard. But the stock apears to be less risky and, when comparing its historical volatility, Kyung Chang Industrial is 1.75 times less risky than Global Standard. The stock trades about -0.14 of its potential returns per unit of risk. The Global Standard Technology is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  1,424,000  in Global Standard Technology on September 11, 2024 and sell it today you would lose (24,000) from holding Global Standard Technology or give up 1.69% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy100.0%
ValuesDaily Returns

Kyung Chang Industrial  vs.  Global Standard Technology

 Performance 
       Timeline  
Kyung Chang Industrial 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
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 weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.
Global Standard Tech 

Risk-Adjusted Performance

0 of 100

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

Kyung Chang and Global Standard Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Kyung Chang and Global Standard

The main advantage of trading using opposite Kyung Chang and Global Standard positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Kyung Chang position performs unexpectedly, Global Standard 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 Global Standard will offset losses from the drop in Global Standard's long position.
The idea behind Kyung Chang Industrial and Global Standard Technology 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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.

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