Correlation Between KMH Hitech and Korea Refractories

Can any of the company-specific risk be diversified away by investing in both KMH Hitech and Korea Refractories 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 KMH Hitech and Korea Refractories into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between KMH Hitech Co and Korea Refractories Co, you can compare the effects of market volatilities on KMH Hitech and Korea Refractories 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 KMH Hitech with a short position of Korea Refractories. Check out your portfolio center. Please also check ongoing floating volatility patterns of KMH Hitech and Korea Refractories.

Diversification Opportunities for KMH Hitech and Korea Refractories

-0.32

Correlation Coefficient

KMH Hitech  Korea Refractories

Very good diversification

The 3 months correlation between KMH and Korea is -0.32. Overlapping area represents the amount of risk that can be diversified away by holding KMH Hitech Co and Korea Refractories Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Korea Refractories and KMH Hitech 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 KMH Hitech Co are associated (or correlated) with Korea Refractories. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Korea Refractories has no effect on the direction of KMH Hitech i.e., KMH Hitech and Korea Refractories go up and down completely randomly.

Pair Corralation between KMH Hitech and Korea Refractories

Assuming the 90 days trading horizon KMH Hitech Co is expected to generate 1.52 times more return on investment than Korea Refractories. However, KMH Hitech is 1.52 times more volatile than Korea Refractories Co. It trades about 0.09 of its potential returns per unit of risk. Korea Refractories Co is currently generating about 0.03 per unit of risk. If you would invest  90,100  in KMH Hitech Co on December 21, 2024 and sell it today you would earn a total of  7,200  from holding KMH Hitech Co or generate 7.99% return on investment over 90 days.

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

KMH Hitech Co  vs.  Korea Refractories Co

KMH Hitech

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in KMH Hitech Co are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, KMH Hitech may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Korea Refractories

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Korea Refractories Co are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Korea Refractories is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with KMH Hitech and Korea Refractories

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

The idea behind KMH Hitech Co and Korea Refractories 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.

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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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.