Correlation Between COWELL FASHION and AfreecaTV

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

By analyzing existing cross correlation between COWELL FASHION CoLtd and AfreecaTV Co, you can compare the effects of market volatilities on COWELL FASHION and AfreecaTV 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 COWELL FASHION with a short position of AfreecaTV. Check out your portfolio center. Please also check ongoing floating volatility patterns of COWELL FASHION and AfreecaTV.

Diversification Opportunities for COWELL FASHION and AfreecaTV

0.28

Correlation Coefficient

COWELL FASHION  AfreecaTV

Modest diversification

The 3 months correlation between COWELL and AfreecaTV is 0.28. Overlapping area represents the amount of risk that can be diversified away by holding COWELL FASHION CoLtd and AfreecaTV Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AfreecaTV and COWELL FASHION 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 COWELL FASHION CoLtd are associated (or correlated) with AfreecaTV. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AfreecaTV has no effect on the direction of COWELL FASHION i.e., COWELL FASHION and AfreecaTV go up and down completely randomly.

Pair Corralation between COWELL FASHION and AfreecaTV

Assuming the 90 days trading horizon COWELL FASHION CoLtd is expected to under-perform the AfreecaTV. But the stock apears to be less risky and, when comparing its historical volatility, COWELL FASHION CoLtd is 3.51 times less risky than AfreecaTV. The stock trades about -0.04 of its potential returns per unit of risk. The AfreecaTV Co is currently generating about -0.01 of returns per unit of risk over similar time horizon. If you would invest  9,165,000  in AfreecaTV Co on December 25, 2024 and sell it today you would lose (765,000) from holding AfreecaTV Co or give up 8.35% of portfolio value over 90 days.

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

COWELL FASHION CoLtd  vs.  AfreecaTV Co

COWELL FASHION CoLtd

Risk-Adjusted Performance

Very Weak

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

AfreecaTV

Risk-Adjusted Performance

Very Weak

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

Pair Trading with COWELL FASHION and AfreecaTV

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

The idea behind COWELL FASHION CoLtd and AfreecaTV Co 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.