Correlation Between Keum Kang and Wonil Special

Can any of the company-specific risk be diversified away by investing in both Keum Kang and Wonil Special 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 Keum Kang and Wonil Special into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Keum Kang Steel and Wonil Special Steel, you can compare the effects of market volatilities on Keum Kang and Wonil Special 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 Keum Kang with a short position of Wonil Special. Check out your portfolio center. Please also check ongoing floating volatility patterns of Keum Kang and Wonil Special.

Diversification Opportunities for Keum Kang and Wonil Special

0.17

Correlation Coefficient

Keum Kang  Wonil Special

Average diversification

The 3 months correlation between Keum and Wonil is 0.17. Overlapping area represents the amount of risk that can be diversified away by holding Keum Kang Steel and Wonil Special Steel in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Wonil Special Steel and Keum Kang 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 Keum Kang Steel are associated (or correlated) with Wonil Special. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Wonil Special Steel has no effect on the direction of Keum Kang i.e., Keum Kang and Wonil Special go up and down completely randomly.

Pair Corralation between Keum Kang and Wonil Special

Assuming the 90 days trading horizon Keum Kang Steel is expected to under-perform the Wonil Special. In addition to that, Keum Kang is 1.35 times more volatile than Wonil Special Steel. It trades about -0.01 of its total potential returns per unit of risk. Wonil Special Steel is currently generating about 0.04 per unit of volatility. If you would invest  706,150  in Wonil Special Steel on November 29, 2024 and sell it today you would earn a total of  15,850  from holding Wonil Special Steel or generate 2.24% return on investment over 90 days.

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

Keum Kang Steel  vs.  Wonil Special Steel

Keum Kang Steel

Risk-Adjusted Performance

Very Weak

Over the last 90 days Keum Kang Steel has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Keum Kang is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Wonil Special Steel

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Wonil Special Steel are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Wonil Special is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Keum Kang and Wonil Special

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

The idea behind Keum Kang Steel and Wonil Special Steel 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 Dashboard module to portfolio dashboard that provides centralized access to all your investments.