Correlation Between Korea Information and Nable Communications

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

Diversification Opportunities for Korea Information and Nable Communications

-0.19

Correlation Coefficient

Korea Information  Nable Communications

Good diversification

The 3 months correlation between Korea and Nable is -0.19. Overlapping area represents the amount of risk that can be diversified away by holding Korea Information Engineering and Nable Communications in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nable Communications 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 Nable Communications. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nable Communications has no effect on the direction of Korea Information i.e., Korea Information and Nable Communications go up and down completely randomly.

Pair Corralation between Korea Information and Nable Communications

Assuming the 90 days trading horizon Korea Information Engineering is expected to under-perform the Nable Communications. In addition to that, Korea Information is 1.19 times more volatile than Nable Communications. It trades about -0.13 of its total potential returns per unit of risk. Nable Communications is currently generating about 0.09 per unit of volatility. If you would invest  610,000  in Nable Communications on September 5, 2024 and sell it today you would earn a total of  33,000  from holding Nable Communications or generate 5.41% 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.  Nable Communications

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 latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Nable Communications

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Nable Communications are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Nable Communications 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 Information and Nable Communications

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

The idea behind Korea Information Engineering and Nable Communications 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.