Correlation Between Korea Environment and LEENO Industrial

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

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

Diversification Opportunities for Korea Environment and LEENO Industrial

-0.75

Correlation Coefficient

Korea Environment  LEENO Industrial

Pay attention - limited upside

The 3 months correlation between Korea and LEENO is -0.75. Overlapping area represents the amount of risk that can be diversified away by holding Korea Environment Technology and LEENO Industrial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LEENO Industrial and Korea Environment 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 Environment Technology are associated (or correlated) with LEENO Industrial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of LEENO Industrial has no effect on the direction of Korea Environment i.e., Korea Environment and LEENO Industrial go up and down completely randomly.

Pair Corralation between Korea Environment and LEENO Industrial

Assuming the 90 days trading horizon Korea Environment is expected to generate 37.44 times less return on investment than LEENO Industrial. But when comparing it to its historical volatility, Korea Environment Technology is 3.57 times less risky than LEENO Industrial. It trades about 0.03 of its potential returns per unit of risk. LEENO Industrial is currently generating about 0.36 of returns per unit of risk over similar time horizon. If you would invest  15,350,000  in LEENO Industrial on September 22, 2024 and sell it today you would earn a total of  3,680,000  from holding LEENO Industrial or generate 23.97% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	95.65%
Values	Daily Returns

Korea Environment Technology  vs.  LEENO Industrial

Korea Environment

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Korea Environment Technology are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Korea Environment sustained solid returns over the last few months and may actually be approaching a breakup point.

LEENO Industrial

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in LEENO Industrial are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, LEENO Industrial 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 Environment and LEENO Industrial

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

The idea behind Korea Environment Technology and LEENO 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.

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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.