Correlation Between Korea Real and KBSTAR 200TR

Can any of the company-specific risk be diversified away by investing in both Korea Real and KBSTAR 200TR 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 KBSTAR 200TR 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 KBSTAR 200TR, you can compare the effects of market volatilities on Korea Real and KBSTAR 200TR 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 KBSTAR 200TR. Check out your portfolio center. Please also check ongoing floating volatility patterns of Korea Real and KBSTAR 200TR.

Diversification Opportunities for Korea Real and KBSTAR 200TR

0.61

Correlation Coefficient

Korea Real  KBSTAR 200TR

Poor diversification

The 3 months correlation between Korea and KBSTAR is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding Korea Real Estate and KBSTAR 200TR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on KBSTAR 200TR 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 KBSTAR 200TR. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of KBSTAR 200TR has no effect on the direction of Korea Real i.e., Korea Real and KBSTAR 200TR go up and down completely randomly.

Pair Corralation between Korea Real and KBSTAR 200TR

Assuming the 90 days trading horizon Korea Real Estate is expected to generate 0.56 times more return on investment than KBSTAR 200TR. However, Korea Real Estate is 1.77 times less risky than KBSTAR 200TR. It trades about 0.14 of its potential returns per unit of risk. KBSTAR 200TR is currently generating about 0.06 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 Together
Strength	Significant
Accuracy	100.0%
Values	Daily Returns

Korea Real Estate  vs.  KBSTAR 200TR

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.

KBSTAR 200TR

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in KBSTAR 200TR are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, KBSTAR 200TR 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 KBSTAR 200TR

The main advantage of trading using opposite Korea Real and KBSTAR 200TR positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Korea Real position performs unexpectedly, KBSTAR 200TR 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 KBSTAR 200TR will offset losses from the drop in KBSTAR 200TR's long position.

The idea behind Korea Real Estate and KBSTAR 200TR 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 Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.