Correlation Between KEPCO Engineering and Nature

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

Diversification Opportunities for KEPCO Engineering and Nature

0.22

Correlation Coefficient

KEPCO Engineering  Nature

Modest diversification

The 3 months correlation between KEPCO and Nature is 0.22. Overlapping area represents the amount of risk that can be diversified away by holding KEPCO Engineering Construction and Nature and Environment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nature and Environment 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 Nature. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nature and Environment has no effect on the direction of KEPCO Engineering i.e., KEPCO Engineering and Nature go up and down completely randomly.

Pair Corralation between KEPCO Engineering and Nature

Assuming the 90 days trading horizon KEPCO Engineering is expected to generate 17.54 times less return on investment than Nature. In addition to that, KEPCO Engineering is 1.16 times more volatile than Nature and Environment. It trades about 0.0 of its total potential returns per unit of risk. Nature and Environment is currently generating about 0.03 per unit of volatility. If you would invest  59,200  in Nature and Environment on October 25, 2024 and sell it today you would earn a total of  1,800  from holding Nature and Environment or generate 3.04% return on investment over 90 days.

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

KEPCO Engineering Construction  vs.  Nature and Environment

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 somewhat strong basic indicators, KEPCO Engineering is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Nature and Environment

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Nature and Environment are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Nature 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 Nature

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

The idea behind KEPCO Engineering Construction and Nature and Environment 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.