Correlation Between KEPCO Engineering and Cafe24 Corp

Can any of the company-specific risk be diversified away by investing in both KEPCO Engineering and Cafe24 Corp 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 Cafe24 Corp 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 Cafe24 Corp, you can compare the effects of market volatilities on KEPCO Engineering and Cafe24 Corp 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 Cafe24 Corp. Check out your portfolio center. Please also check ongoing floating volatility patterns of KEPCO Engineering and Cafe24 Corp.

Diversification Opportunities for KEPCO Engineering and Cafe24 Corp

-0.28

Correlation Coefficient

KEPCO Engineering  Cafe24 Corp

Very good diversification

The 3 months correlation between KEPCO and Cafe24 is -0.28. Overlapping area represents the amount of risk that can be diversified away by holding KEPCO Engineering Construction and Cafe24 Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cafe24 Corp 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 Cafe24 Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cafe24 Corp has no effect on the direction of KEPCO Engineering i.e., KEPCO Engineering and Cafe24 Corp go up and down completely randomly.

Pair Corralation between KEPCO Engineering and Cafe24 Corp

Assuming the 90 days trading horizon KEPCO Engineering is expected to generate 3.03 times less return on investment than Cafe24 Corp. But when comparing it to its historical volatility, KEPCO Engineering Construction is 2.0 times less risky than Cafe24 Corp. It trades about 0.06 of its potential returns per unit of risk. Cafe24 Corp is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  2,845,000  in Cafe24 Corp on September 5, 2024 and sell it today you would earn a total of  530,000  from holding Cafe24 Corp or generate 18.63% return on investment over 90 days.

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

KEPCO Engineering Construction  vs.  Cafe24 Corp

KEPCO Engineering

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in KEPCO Engineering Construction are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, KEPCO Engineering may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Cafe24 Corp

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Cafe24 Corp are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Cafe24 Corp sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with KEPCO Engineering and Cafe24 Corp

The main advantage of trading using opposite KEPCO Engineering and Cafe24 Corp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if KEPCO Engineering position performs unexpectedly, Cafe24 Corp 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 Cafe24 Corp will offset losses from the drop in Cafe24 Corp's long position.

The idea behind KEPCO Engineering Construction and Cafe24 Corp 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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.