Correlation Between Korea Electronic and Hotel Shilla

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

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

Diversification Opportunities for Korea Electronic and Hotel Shilla

0.94

Correlation Coefficient

Korea Electronic  Hotel Shilla

Almost no diversification

The 3 months correlation between Korea and Hotel is 0.94. Overlapping area represents the amount of risk that can be diversified away by holding Korea Electronic Certification and Hotel Shilla Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hotel Shilla and Korea Electronic 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 Electronic Certification are associated (or correlated) with Hotel Shilla. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hotel Shilla has no effect on the direction of Korea Electronic i.e., Korea Electronic and Hotel Shilla go up and down completely randomly.

Pair Corralation between Korea Electronic and Hotel Shilla

Assuming the 90 days trading horizon Korea Electronic Certification is expected to generate 2.59 times more return on investment than Hotel Shilla. However, Korea Electronic is 2.59 times more volatile than Hotel Shilla Co. It trades about 0.54 of its potential returns per unit of risk. Hotel Shilla Co is currently generating about 0.09 per unit of risk. If you would invest  253,882  in Korea Electronic Certification on October 9, 2024 and sell it today you would earn a total of  61,618  from holding Korea Electronic Certification or generate 24.27% return on investment over 90 days.

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

Korea Electronic Certification  vs.  Hotel Shilla Co

Korea Electronic Cer

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Korea Electronic Certification 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.

Hotel Shilla

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Hotel Shilla Co has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Korea Electronic and Hotel Shilla

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

The idea behind Korea Electronic Certification and Hotel Shilla 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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.