Correlation Between KTB Investment and Dongbang Ship

Can any of the company-specific risk be diversified away by investing in both KTB Investment and Dongbang Ship 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 KTB Investment and Dongbang Ship into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between KTB Investment Securities and Dongbang Ship Machinery, you can compare the effects of market volatilities on KTB Investment and Dongbang Ship 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 KTB Investment with a short position of Dongbang Ship. Check out your portfolio center. Please also check ongoing floating volatility patterns of KTB Investment and Dongbang Ship.

Diversification Opportunities for KTB Investment and Dongbang Ship

-0.1

Correlation Coefficient

KTB Investment  Dongbang Ship

Good diversification

The 3 months correlation between KTB and Dongbang is -0.1. Overlapping area represents the amount of risk that can be diversified away by holding KTB Investment Securities and Dongbang Ship Machinery in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dongbang Ship Machinery and KTB Investment 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 KTB Investment Securities are associated (or correlated) with Dongbang Ship. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dongbang Ship Machinery has no effect on the direction of KTB Investment i.e., KTB Investment and Dongbang Ship go up and down completely randomly.

Pair Corralation between KTB Investment and Dongbang Ship

Assuming the 90 days trading horizon KTB Investment Securities is expected to generate 0.83 times more return on investment than Dongbang Ship. However, KTB Investment Securities is 1.2 times less risky than Dongbang Ship. It trades about 0.46 of its potential returns per unit of risk. Dongbang Ship Machinery is currently generating about 0.08 per unit of risk. If you would invest  267,000  in KTB Investment Securities on September 29, 2024 and sell it today you would earn a total of  99,500  from holding KTB Investment Securities or generate 37.27% return on investment over 90 days.

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

KTB Investment Securities  vs.  Dongbang Ship Machinery

KTB Investment Securities

Risk-Adjusted Performance

11 of 100

Good

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

Dongbang Ship Machinery

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Dongbang Ship Machinery are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Dongbang Ship sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with KTB Investment and Dongbang Ship

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

The idea behind KTB Investment Securities and Dongbang Ship Machinery 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.