Correlation Between Korea Ratings and CS BEARING

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

Diversification Opportunities for Korea Ratings and CS BEARING

-0.74

Correlation Coefficient

Korea Ratings  CS BEARING

Pay attention - limited upside

The 3 months correlation between Korea and 297090 is -0.74. Overlapping area represents the amount of risk that can be diversified away by holding Korea Ratings Co and CS BEARING CoLtd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CS BEARING CoLtd 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 CS BEARING. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CS BEARING CoLtd has no effect on the direction of Korea Ratings i.e., Korea Ratings and CS BEARING go up and down completely randomly.

Pair Corralation between Korea Ratings and CS BEARING

Assuming the 90 days trading horizon Korea Ratings is expected to generate 31.04 times less return on investment than CS BEARING. But when comparing it to its historical volatility, Korea Ratings Co is 6.49 times less risky than CS BEARING. It trades about 0.14 of its potential returns per unit of risk. CS BEARING CoLtd is currently generating about 0.67 of returns per unit of risk over similar time horizon. If you would invest  366,000  in CS BEARING CoLtd on October 9, 2024 and sell it today you would earn a total of  204,000  from holding CS BEARING CoLtd or generate 55.74% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	94.74%
Values	Daily Returns

Korea Ratings Co  vs.  CS BEARING CoLtd

Korea Ratings

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Korea Ratings Co are ranked lower than 10 (%) 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.

CS BEARING CoLtd

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days CS BEARING CoLtd has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, CS BEARING 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 Ratings and CS BEARING

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

The idea behind Korea Ratings Co and CS BEARING CoLtd 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.

Check out your portfolio center.

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.