Correlation Between Korea Real and EBEST Investment

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

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

Diversification Opportunities for Korea Real and EBEST Investment

-0.2

Correlation Coefficient

Korea Real  EBEST Investment

Good diversification

The 3 months correlation between Korea and EBEST is -0.2. Overlapping area represents the amount of risk that can be diversified away by holding Korea Real Estate and EBEST Investment Securities in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on EBEST Investment Sec and Korea Real 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 Real Estate are associated (or correlated) with EBEST Investment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of EBEST Investment Sec has no effect on the direction of Korea Real i.e., Korea Real and EBEST Investment go up and down completely randomly.

Pair Corralation between Korea Real and EBEST Investment

Assuming the 90 days trading horizon Korea Real Estate is expected to generate 0.4 times more return on investment than EBEST Investment. However, Korea Real Estate is 2.47 times less risky than EBEST Investment. It trades about 0.14 of its potential returns per unit of risk. EBEST Investment Securities is currently generating about 0.0 per unit of risk. If you would invest  94,473  in Korea Real Estate on December 2, 2024 and sell it today you would earn a total of  5,327  from holding Korea Real Estate or generate 5.64% return on investment over 90 days.

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

Korea Real Estate  vs.  EBEST Investment Securities

Korea Real Estate

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Korea Real Estate are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Korea Real is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

EBEST Investment Sec

Risk-Adjusted Performance

Very Weak

Over the last 90 days EBEST Investment Securities has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, EBEST Investment 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 Real and EBEST Investment

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

The idea behind Korea Real Estate and EBEST Investment Securities 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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.