Correlation Between Korea Information and Korea Ratings

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

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

Diversification Opportunities for Korea Information and Korea Ratings

-0.24

Correlation Coefficient

Korea Information  Korea Ratings

Very good diversification

The 3 months correlation between Korea and Korea is -0.24. Overlapping area represents the amount of risk that can be diversified away by holding Korea Information Engineering and Korea Ratings Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Korea Ratings and Korea Information 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 Information Engineering are associated (or correlated) with Korea Ratings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Korea Ratings has no effect on the direction of Korea Information i.e., Korea Information and Korea Ratings go up and down completely randomly.

Pair Corralation between Korea Information and Korea Ratings

Assuming the 90 days trading horizon Korea Information Engineering is expected to under-perform the Korea Ratings. In addition to that, Korea Information is 3.99 times more volatile than Korea Ratings Co. It trades about -0.03 of its total potential returns per unit of risk. Korea Ratings Co is currently generating about 0.11 per unit of volatility. If you would invest  6,452,720  in Korea Ratings Co on October 26, 2024 and sell it today you would earn a total of  2,607,280  from holding Korea Ratings Co or generate 40.41% return on investment over 90 days.

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

Korea Information Engineering  vs.  Korea Ratings Co

Korea Information

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Korea Information Engineering has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Korea Information is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Korea Ratings

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Korea Ratings Co are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Korea Ratings may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Korea Information and Korea Ratings

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

The idea behind Korea Information Engineering and Korea Ratings Co 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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.