Correlation Between Korea Ratings and KB No2

Can any of the company-specific risk be diversified away by investing in both Korea Ratings and KB No2 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 Ratings and KB No2 into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Korea Ratings Co and KB No2 Special, you can compare the effects of market volatilities on Korea Ratings and KB No2 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 Ratings with a short position of KB No2. Check out your portfolio center. Please also check ongoing floating volatility patterns of Korea Ratings and KB No2.

Diversification Opportunities for Korea Ratings and KB No2

-0.66

Correlation Coefficient

Korea Ratings  KB No2

Excellent diversification

The 3 months correlation between Korea and 192250 is -0.66. Overlapping area represents the amount of risk that can be diversified away by holding Korea Ratings Co and KB No2 Special in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on KB No2 Special and Korea Ratings 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 Ratings Co are associated (or correlated) with KB No2. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of KB No2 Special has no effect on the direction of Korea Ratings i.e., Korea Ratings and KB No2 go up and down completely randomly.

Pair Corralation between Korea Ratings and KB No2

Assuming the 90 days trading horizon Korea Ratings is expected to generate 1.9 times less return on investment than KB No2. But when comparing it to its historical volatility, Korea Ratings Co is 4.74 times less risky than KB No2. It trades about 0.11 of its potential returns per unit of risk. KB No2 Special is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  758,000  in KB No2 Special on September 22, 2024 and sell it today you would earn a total of  17,000  from holding KB No2 Special or generate 2.24% return on investment over 90 days.

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

Korea Ratings Co  vs.  KB No2 Special

Korea Ratings

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Korea Ratings Co are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Korea Ratings is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

KB No2 Special

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days KB No2 Special has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Korea Ratings and KB No2

The main advantage of trading using opposite Korea Ratings and KB No2 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Korea Ratings position performs unexpectedly, KB No2 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 KB No2 will offset losses from the drop in KB No2's long position.

The idea behind Korea Ratings Co and KB No2 Special 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..