Correlation Between Gyeongnam Steel and Konan Technology

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

Diversification Opportunities for Gyeongnam Steel and Konan Technology

0.46

Correlation Coefficient

Gyeongnam Steel  Konan Technology

Very weak diversification

The 3 months correlation between Gyeongnam and Konan is 0.46. Overlapping area represents the amount of risk that can be diversified away by holding Gyeongnam Steel Co and Konan Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Konan Technology 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 Konan Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Konan Technology has no effect on the direction of Gyeongnam Steel i.e., Gyeongnam Steel and Konan Technology go up and down completely randomly.

Pair Corralation between Gyeongnam Steel and Konan Technology

Assuming the 90 days trading horizon Gyeongnam Steel is expected to generate 23.94 times less return on investment than Konan Technology. But when comparing it to its historical volatility, Gyeongnam Steel Co is 3.18 times less risky than Konan Technology. It trades about 0.03 of its potential returns per unit of risk. Konan Technology is currently generating about 0.2 of returns per unit of risk over similar time horizon. If you would invest  1,515,000  in Konan Technology on September 2, 2024 and sell it today you would earn a total of  995,000  from holding Konan Technology or generate 65.68% return on investment over 90 days.

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

Gyeongnam Steel Co  vs.  Konan Technology

Gyeongnam Steel

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Gyeongnam Steel Co are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Gyeongnam Steel is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Konan Technology

Risk-Adjusted Performance

15 of 100

Good

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

Pair Trading with Gyeongnam Steel and Konan Technology

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

The idea behind Gyeongnam Steel Co and Konan Technology 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.