Correlation Between KEPCO Engineering and Shinhan Inverse

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

Diversification Opportunities for KEPCO Engineering and Shinhan Inverse

-0.06

Correlation Coefficient

KEPCO Engineering  Shinhan Inverse

Good diversification

The 3 months correlation between KEPCO and Shinhan is -0.06. Overlapping area represents the amount of risk that can be diversified away by holding KEPCO Engineering Construction and Shinhan Inverse Silver in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shinhan Inverse Silver 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 Shinhan Inverse. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shinhan Inverse Silver has no effect on the direction of KEPCO Engineering i.e., KEPCO Engineering and Shinhan Inverse go up and down completely randomly.

Pair Corralation between KEPCO Engineering and Shinhan Inverse

Assuming the 90 days trading horizon KEPCO Engineering Construction is expected to generate 1.5 times more return on investment than Shinhan Inverse. However, KEPCO Engineering is 1.5 times more volatile than Shinhan Inverse Silver. It trades about 0.02 of its potential returns per unit of risk. Shinhan Inverse Silver is currently generating about -0.01 per unit of risk. If you would invest  5,295,428  in KEPCO Engineering Construction on September 21, 2024 and sell it today you would earn a total of  134,572  from holding KEPCO Engineering Construction or generate 2.54% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.34%
Values	Daily Returns

KEPCO Engineering Construction  vs.  Shinhan Inverse Silver

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.

Shinhan Inverse Silver

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Shinhan Inverse Silver are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Shinhan Inverse may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with KEPCO Engineering and Shinhan Inverse

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

The idea behind KEPCO Engineering Construction and Shinhan Inverse Silver 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.