Correlation Between KEPCO Engineering and Jeju Beer

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

Diversification Opportunities for KEPCO Engineering and Jeju Beer

0.14

Correlation Coefficient

KEPCO Engineering  Jeju Beer

Average diversification

The 3 months correlation between KEPCO and Jeju is 0.14. Overlapping area represents the amount of risk that can be diversified away by holding KEPCO Engineering Construction and Jeju Beer Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Jeju Beer 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 Jeju Beer. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Jeju Beer has no effect on the direction of KEPCO Engineering i.e., KEPCO Engineering and Jeju Beer go up and down completely randomly.

Pair Corralation between KEPCO Engineering and Jeju Beer

Assuming the 90 days trading horizon KEPCO Engineering Construction is expected to generate 0.65 times more return on investment than Jeju Beer. However, KEPCO Engineering Construction is 1.54 times less risky than Jeju Beer. It trades about 0.01 of its potential returns per unit of risk. Jeju Beer Co is currently generating about -0.03 per unit of risk. If you would invest  6,544,911  in KEPCO Engineering Construction on October 23, 2024 and sell it today you would lose (84,911) from holding KEPCO Engineering Construction or give up 1.3% of portfolio value over 90 days.

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

KEPCO Engineering Construction  vs.  Jeju Beer Co

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.

Jeju Beer

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Jeju Beer Co are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Jeju Beer may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with KEPCO Engineering and Jeju Beer

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

The idea behind KEPCO Engineering Construction and Jeju Beer Co 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.

Check out your portfolio center.

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 Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.