Correlation Between Jeong Moon and Korea Investment

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

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

Diversification Opportunities for Jeong Moon and Korea Investment

0.3

Correlation Coefficient

Jeong Moon  Korea Investment

Weak diversification

The 3 months correlation between Jeong and Korea is 0.3. Overlapping area represents the amount of risk that can be diversified away by holding Jeong Moon Information and Korea Investment Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Korea Investment Holdings and Jeong Moon 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 Jeong Moon Information are associated (or correlated) with Korea Investment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Korea Investment Holdings has no effect on the direction of Jeong Moon i.e., Jeong Moon and Korea Investment go up and down completely randomly.

Pair Corralation between Jeong Moon and Korea Investment

Assuming the 90 days trading horizon Jeong Moon is expected to generate 40.54 times less return on investment than Korea Investment. In addition to that, Jeong Moon is 1.25 times more volatile than Korea Investment Holdings. It trades about 0.0 of its total potential returns per unit of risk. Korea Investment Holdings is currently generating about 0.19 per unit of volatility. If you would invest  4,921,961  in Korea Investment Holdings on December 22, 2024 and sell it today you would earn a total of  718,039  from holding Korea Investment Holdings or generate 14.59% return on investment over 90 days.

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

Jeong Moon Information  vs.  Korea Investment Holdings

Jeong Moon Information

Risk-Adjusted Performance

Very Weak

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

Korea Investment Holdings

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Korea Investment Holdings are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Korea Investment sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Jeong Moon and Korea Investment

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

The idea behind Jeong Moon Information and Korea Investment Holdings 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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.