Correlation Between Gyeongnam Steel and RPBio
Can any of the company-specific risk be diversified away by investing in both Gyeongnam Steel and RPBio 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 RPBio 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 RPBio Inc, you can compare the effects of market volatilities on Gyeongnam Steel and RPBio 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 RPBio. Check out your portfolio center. Please also check ongoing floating volatility patterns of Gyeongnam Steel and RPBio.
Diversification Opportunities for Gyeongnam Steel and RPBio
-0.33 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Gyeongnam and RPBio is -0.33. Overlapping area represents the amount of risk that can be diversified away by holding Gyeongnam Steel Co and RPBio Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on RPBio Inc 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 RPBio. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of RPBio Inc has no effect on the direction of Gyeongnam Steel i.e., Gyeongnam Steel and RPBio go up and down completely randomly.
Pair Corralation between Gyeongnam Steel and RPBio
Assuming the 90 days trading horizon Gyeongnam Steel Co is expected to generate 1.25 times more return on investment than RPBio. However, Gyeongnam Steel is 1.25 times more volatile than RPBio Inc. It trades about 0.13 of its potential returns per unit of risk. RPBio Inc is currently generating about -0.09 per unit of risk. If you would invest 274,500 in Gyeongnam Steel Co on September 6, 2024 and sell it today you would earn a total of 66,000 from holding Gyeongnam Steel Co or generate 24.04% 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. RPBio Inc
Performance |
Timeline |
Gyeongnam Steel |
RPBio Inc |
Gyeongnam Steel and RPBio Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Gyeongnam Steel and RPBio
The main advantage of trading using opposite Gyeongnam Steel and RPBio positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Gyeongnam Steel position performs unexpectedly, RPBio 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 RPBio will offset losses from the drop in RPBio's long position.Gyeongnam Steel vs. Keum Kang Steel | Gyeongnam Steel vs. Tplex Co | Gyeongnam Steel vs. Wonil Special Steel |
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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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.
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