Correlation Between Phoenix Materials and Korea Alcohol

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

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

Diversification Opportunities for Phoenix Materials and Korea Alcohol

0.81

Correlation Coefficient

Phoenix Materials  Korea Alcohol

Very poor diversification

The 3 months correlation between Phoenix and Korea is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding Phoenix Materials Co and Korea Alcohol Industrial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Korea Alcohol Industrial and Phoenix Materials 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 Phoenix Materials Co are associated (or correlated) with Korea Alcohol. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Korea Alcohol Industrial has no effect on the direction of Phoenix Materials i.e., Phoenix Materials and Korea Alcohol go up and down completely randomly.

Pair Corralation between Phoenix Materials and Korea Alcohol

Assuming the 90 days trading horizon Phoenix Materials Co is expected to under-perform the Korea Alcohol. In addition to that, Phoenix Materials is 2.28 times more volatile than Korea Alcohol Industrial. It trades about -0.01 of its total potential returns per unit of risk. Korea Alcohol Industrial is currently generating about -0.01 per unit of volatility. If you would invest  877,119  in Korea Alcohol Industrial on October 23, 2024 and sell it today you would lose (14,119) from holding Korea Alcohol Industrial or give up 1.61% of portfolio value over 90 days.

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

Phoenix Materials Co  vs.  Korea Alcohol Industrial

Phoenix Materials

Risk-Adjusted Performance

0 of 100

Very Weak

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

Korea Alcohol Industrial

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Phoenix Materials and Korea Alcohol

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

The idea behind Phoenix Materials Co and Korea Alcohol Industrial 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.