Correlation Between ICD and Kolon Globalco

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

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

Diversification Opportunities for ICD and Kolon Globalco

0.66

Correlation Coefficient

ICD  Kolon Globalco

Poor diversification

The 3 months correlation between ICD and Kolon is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding ICD Co and Kolon Globalco in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kolon Globalco and ICD 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 ICD Co are associated (or correlated) with Kolon Globalco. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kolon Globalco has no effect on the direction of ICD i.e., ICD and Kolon Globalco go up and down completely randomly.

Pair Corralation between ICD and Kolon Globalco

Assuming the 90 days trading horizon ICD Co is expected to generate 3.53 times more return on investment than Kolon Globalco. However, ICD is 3.53 times more volatile than Kolon Globalco. It trades about 0.03 of its potential returns per unit of risk. Kolon Globalco is currently generating about -0.03 per unit of risk. If you would invest  436,500  in ICD Co on December 31, 2024 and sell it today you would earn a total of  7,500  from holding ICD Co or generate 1.72% return on investment over 90 days.

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

ICD Co  vs.  Kolon Globalco

ICD Co

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in ICD Co are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, ICD may actually be approaching a critical reversion point that can send shares even higher in May 2025.

Kolon Globalco

Risk-Adjusted Performance

Very Weak

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

Pair Trading with ICD and Kolon Globalco

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

The idea behind ICD Co and Kolon Globalco 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.