Correlation Between Korea Information and Pyung Hwa

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

Diversification Opportunities for Korea Information and Pyung Hwa

0.58

Correlation Coefficient

Korea Information  Pyung Hwa

Very weak diversification

The 3 months correlation between Korea and Pyung is 0.58. Overlapping area represents the amount of risk that can be diversified away by holding Korea Information Communicatio and Pyung Hwa Industrial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pyung Hwa 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 Pyung Hwa. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pyung Hwa Industrial has no effect on the direction of Korea Information i.e., Korea Information and Pyung Hwa go up and down completely randomly.

Pair Corralation between Korea Information and Pyung Hwa

Assuming the 90 days trading horizon Korea Information is expected to generate 2.24 times less return on investment than Pyung Hwa. But when comparing it to its historical volatility, Korea Information Communications is 2.9 times less risky than Pyung Hwa. It trades about 0.26 of its potential returns per unit of risk. Pyung Hwa Industrial is currently generating about 0.2 of returns per unit of risk over similar time horizon. If you would invest  91,200  in Pyung Hwa Industrial on October 14, 2024 and sell it today you would earn a total of  8,700  from holding Pyung Hwa Industrial or generate 9.54% return on investment over 90 days.

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

Korea Information Communicatio  vs.  Pyung Hwa 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.

Pyung Hwa Industrial

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Pyung Hwa Industrial has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Pyung Hwa 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 Pyung Hwa

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

The idea behind Korea Information Communications and Pyung Hwa 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.