Correlation Between Gyeongnam Steel and Robostar CoLtd

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

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

Diversification Opportunities for Gyeongnam Steel and Robostar CoLtd

-0.09

Correlation Coefficient

Gyeongnam Steel  Robostar CoLtd

Good diversification

The 3 months correlation between Gyeongnam and Robostar is -0.09. Overlapping area represents the amount of risk that can be diversified away by holding Gyeongnam Steel Co and Robostar CoLtd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Robostar CoLtd and Gyeongnam Steel 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 Gyeongnam Steel Co are associated (or correlated) with Robostar CoLtd. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Robostar CoLtd has no effect on the direction of Gyeongnam Steel i.e., Gyeongnam Steel and Robostar CoLtd go up and down completely randomly.

Pair Corralation between Gyeongnam Steel and Robostar CoLtd

Assuming the 90 days trading horizon Gyeongnam Steel is expected to generate 1.21 times less return on investment than Robostar CoLtd. In addition to that, Gyeongnam Steel is 1.44 times more volatile than Robostar CoLtd. It trades about 0.2 of its total potential returns per unit of risk. Robostar CoLtd is currently generating about 0.36 per unit of volatility. If you would invest  1,801,000  in Robostar CoLtd on October 10, 2024 and sell it today you would earn a total of  684,000  from holding Robostar CoLtd or generate 37.98% return on investment over 90 days.

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

Gyeongnam Steel Co  vs.  Robostar CoLtd

Gyeongnam Steel

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Gyeongnam Steel Co are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Gyeongnam Steel sustained solid returns over the last few months and may actually be approaching a breakup point.

Robostar CoLtd

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Robostar CoLtd are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Robostar CoLtd sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Gyeongnam Steel and Robostar CoLtd

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

The idea behind Gyeongnam Steel Co and Robostar 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.

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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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.