Correlation Between Korea Information and Coloray International

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

Diversification Opportunities for Korea Information and Coloray International

0.43

Correlation Coefficient

Korea Information  Coloray International

Very weak diversification

The 3 months correlation between Korea and Coloray is 0.43. Overlapping area represents the amount of risk that can be diversified away by holding Korea Information Engineering and Coloray International Investme in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Coloray International 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 Coloray International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Coloray International has no effect on the direction of Korea Information i.e., Korea Information and Coloray International go up and down completely randomly.

Pair Corralation between Korea Information and Coloray International

Assuming the 90 days trading horizon Korea Information Engineering is expected to under-perform the Coloray International. In addition to that, Korea Information is 1.02 times more volatile than Coloray International Investment. It trades about -0.04 of its total potential returns per unit of risk. Coloray International Investment is currently generating about -0.03 per unit of volatility. If you would invest  123,041  in Coloray International Investment on October 22, 2024 and sell it today you would lose (52,741) from holding Coloray International Investment or give up 42.86% of portfolio value over 90 days.

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

Korea Information Engineering  vs.  Coloray International Investme

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.

Coloray International

Risk-Adjusted Performance

1 of 100

Very Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Coloray International Investment are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Coloray International 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 Coloray International

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

The idea behind Korea Information Engineering and Coloray International Investment 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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.