Correlation Between Kyung Chang and Drb Industrial

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

Diversification Opportunities for Kyung Chang and Drb Industrial

-0.38

Correlation Coefficient

Kyung Chang  Drb Industrial

Very good diversification

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

Pair Corralation between Kyung Chang and Drb Industrial

Assuming the 90 days trading horizon Kyung Chang Industrial is expected to under-perform the Drb Industrial. But the stock apears to be less risky and, when comparing its historical volatility, Kyung Chang Industrial is 1.32 times less risky than Drb Industrial. The stock trades about -0.07 of its potential returns per unit of risk. The Drb Industrial is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  675,000  in Drb Industrial on December 23, 2024 and sell it today you would earn a total of  65,000  from holding Drb Industrial or generate 9.63% return on investment over 90 days.

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

Kyung Chang Industrial  vs.  Drb Industrial

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.

Drb Industrial

Risk-Adjusted Performance

Modest

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

Pair Trading with Kyung Chang and Drb Industrial

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

The idea behind Kyung Chang Industrial and Drb Industrial 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.