Correlation Between KEPCO Engineering and TL

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

Diversification Opportunities for KEPCO Engineering and TL

0.38

Correlation Coefficient

KEPCO Engineering  TL

Weak diversification

The 3 months correlation between KEPCO and TL is 0.38. Overlapping area represents the amount of risk that can be diversified away by holding KEPCO Engineering Construction and TL Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TL Co 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 TL. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of TL Co has no effect on the direction of KEPCO Engineering i.e., KEPCO Engineering and TL go up and down completely randomly.

Pair Corralation between KEPCO Engineering and TL

Assuming the 90 days trading horizon KEPCO Engineering Construction is expected to under-perform the TL. In addition to that, KEPCO Engineering is 1.01 times more volatile than TL Co. It trades about -0.17 of its total potential returns per unit of risk. TL Co is currently generating about -0.03 per unit of volatility. If you would invest  6,650,000  in TL Co on September 13, 2024 and sell it today you would lose (510,000) from holding TL Co or give up 7.67% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.31%
Values	Daily Returns

KEPCO Engineering Construction  vs.  TL 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 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.

TL Co

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days TL Co has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, TL 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 TL

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

The idea behind KEPCO Engineering Construction and TL 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.