Correlation Between KEPCO Engineering and CU Medical

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

Diversification Opportunities for KEPCO Engineering and CU Medical

0.45

Correlation Coefficient

KEPCO Engineering  CU Medical

Very weak diversification

The 3 months correlation between KEPCO and 115480 is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding KEPCO Engineering Construction and CU Medical Systems in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CU Medical Systems 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 CU Medical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CU Medical Systems has no effect on the direction of KEPCO Engineering i.e., KEPCO Engineering and CU Medical go up and down completely randomly.

Pair Corralation between KEPCO Engineering and CU Medical

Assuming the 90 days trading horizon KEPCO Engineering Construction is expected to generate 1.63 times more return on investment than CU Medical. However, KEPCO Engineering is 1.63 times more volatile than CU Medical Systems. It trades about -0.01 of its potential returns per unit of risk. CU Medical Systems is currently generating about -0.04 per unit of risk. If you would invest  6,400,000  in KEPCO Engineering Construction on September 24, 2024 and sell it today you would lose (1,000,000) from holding KEPCO Engineering Construction or give up 15.62% of portfolio value over 90 days.

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

KEPCO Engineering Construction  vs.  CU Medical Systems

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 January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

CU Medical Systems

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days CU Medical Systems 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.

Pair Trading with KEPCO Engineering and CU Medical

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

The idea behind KEPCO Engineering Construction and CU Medical Systems 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.