Correlation Between Phoenix Materials and KEPCO Engineering

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

Diversification Opportunities for Phoenix Materials and KEPCO Engineering

0.48

Correlation Coefficient

Phoenix Materials  KEPCO Engineering

Very weak diversification

The 3 months correlation between Phoenix and KEPCO is 0.48. Overlapping area represents the amount of risk that can be diversified away by holding Phoenix Materials Co and KEPCO Engineering Construction in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on KEPCO Engineering 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 KEPCO Engineering. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of KEPCO Engineering has no effect on the direction of Phoenix Materials i.e., Phoenix Materials and KEPCO Engineering go up and down completely randomly.

Pair Corralation between Phoenix Materials and KEPCO Engineering

Assuming the 90 days trading horizon Phoenix Materials Co is expected to under-perform the KEPCO Engineering. In addition to that, Phoenix Materials is 1.62 times more volatile than KEPCO Engineering Construction. It trades about -0.02 of its total potential returns per unit of risk. KEPCO Engineering Construction is currently generating about 0.0 per unit of volatility. If you would invest  6,277,165  in KEPCO Engineering Construction on October 4, 2024 and sell it today you would lose (907,165) from holding KEPCO Engineering Construction or give up 14.45% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	96.06%
Values	Daily Returns

Phoenix Materials Co  vs.  KEPCO Engineering Construction

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 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.

KEPCO Engineering

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days KEPCO Engineering Construction 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 Phoenix Materials and KEPCO Engineering

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

The idea behind Phoenix Materials Co and KEPCO Engineering Construction 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..