Correlation Between KEPCO Engineering and Han Kook

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

By analyzing existing cross correlation between KEPCO Engineering Construction and Han Kook Capital, you can compare the effects of market volatilities on KEPCO Engineering and Han Kook 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 KEPCO Engineering with a short position of Han Kook. Check out your portfolio center. Please also check ongoing floating volatility patterns of KEPCO Engineering and Han Kook.

Diversification Opportunities for KEPCO Engineering and Han Kook

0.09

Correlation Coefficient

KEPCO Engineering  Han Kook

Significant diversification

The 3 months correlation between KEPCO and Han is 0.09. Overlapping area represents the amount of risk that can be diversified away by holding KEPCO Engineering Construction and Han Kook Capital in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Han Kook Capital and KEPCO Engineering 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 KEPCO Engineering Construction are associated (or correlated) with Han Kook. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Han Kook Capital has no effect on the direction of KEPCO Engineering i.e., KEPCO Engineering and Han Kook go up and down completely randomly.

Pair Corralation between KEPCO Engineering and Han Kook

Assuming the 90 days trading horizon KEPCO Engineering Construction is expected to generate 1.6 times more return on investment than Han Kook. However, KEPCO Engineering is 1.6 times more volatile than Han Kook Capital. It trades about 0.34 of its potential returns per unit of risk. Han Kook Capital is currently generating about 0.29 per unit of risk. If you would invest  4,995,000  in KEPCO Engineering Construction on October 10, 2024 and sell it today you would earn a total of  695,000  from holding KEPCO Engineering Construction or generate 13.91% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	95.0%
Values	Daily Returns

KEPCO Engineering Construction  vs.  Han Kook Capital

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 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.

Han Kook Capital

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with KEPCO Engineering and Han Kook

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

The idea behind KEPCO Engineering Construction and Han Kook Capital 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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.