Correlation Between Korea Information and Taeyang Metal

Can any of the company-specific risk be diversified away by investing in both Korea Information and Taeyang Metal 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 Korea Information and Taeyang Metal into the same portfolio, which is an essential part of the fundamental portfolio management process.

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

Diversification Opportunities for Korea Information and Taeyang Metal

0.01

Correlation Coefficient

Korea Information  Taeyang Metal

Significant diversification

The 3 months correlation between Korea and Taeyang is 0.01. Overlapping area represents the amount of risk that can be diversified away by holding Korea Information Communicatio and Taeyang Metal Industrial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Taeyang Metal Industrial and Korea Information 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 Korea Information Communications are associated (or correlated) with Taeyang Metal. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Taeyang Metal Industrial has no effect on the direction of Korea Information i.e., Korea Information and Taeyang Metal go up and down completely randomly.

Pair Corralation between Korea Information and Taeyang Metal

Assuming the 90 days trading horizon Korea Information Communications is expected to generate 0.46 times more return on investment than Taeyang Metal. However, Korea Information Communications is 2.18 times less risky than Taeyang Metal. It trades about -0.01 of its potential returns per unit of risk. Taeyang Metal Industrial is currently generating about -0.04 per unit of risk. If you would invest  830,000  in Korea Information Communications on August 31, 2024 and sell it today you would lose (11,000) from holding Korea Information Communications or give up 1.33% of portfolio value over 90 days.

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

Korea Information Communicatio  vs.  Taeyang Metal Industrial

Korea Information

Risk-Adjusted Performance

0 of 100

Very Weak

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

Taeyang Metal Industrial

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Korea Information and Taeyang Metal

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

The idea behind Korea Information Communications and Taeyang Metal 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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.