Correlation Between Korea Computer and KCC Engineering
Can any of the company-specific risk be diversified away by investing in both Korea Computer and KCC Engineering 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 Korea Computer and KCC Engineering into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Korea Computer and KCC Engineering Construction, you can compare the effects of market volatilities on Korea Computer and KCC Engineering 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 Korea Computer with a short position of KCC Engineering. Check out your portfolio center. Please also check ongoing floating volatility patterns of Korea Computer and KCC Engineering.
Diversification Opportunities for Korea Computer and KCC Engineering
0.35 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Korea and KCC is 0.35. Overlapping area represents the amount of risk that can be diversified away by holding Korea Computer and KCC Engineering Construction in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on KCC Engineering Cons and Korea Computer 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 Korea Computer are associated (or correlated) with KCC Engineering. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of KCC Engineering Cons has no effect on the direction of Korea Computer i.e., Korea Computer and KCC Engineering go up and down completely randomly.
Pair Corralation between Korea Computer and KCC Engineering
Assuming the 90 days trading horizon Korea Computer is expected to generate 2.24 times more return on investment than KCC Engineering. However, Korea Computer is 2.24 times more volatile than KCC Engineering Construction. It trades about 0.03 of its potential returns per unit of risk. KCC Engineering Construction is currently generating about -0.07 per unit of risk. If you would invest 509,944 in Korea Computer on October 6, 2024 and sell it today you would earn a total of 14,056 from holding Korea Computer or generate 2.76% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Very Weak |
Accuracy | 100.0% |
Values | Daily Returns |
Korea Computer vs. KCC Engineering Construction
Performance |
Timeline |
Korea Computer |
KCC Engineering Cons |
Korea Computer and KCC Engineering Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Korea Computer and KCC Engineering
The main advantage of trading using opposite Korea Computer and KCC Engineering positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Korea Computer position performs unexpectedly, KCC Engineering 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 KCC Engineering will offset losses from the drop in KCC Engineering's long position.Korea Computer vs. LG Display | Korea Computer vs. Hyundai Motor | Korea Computer vs. Hyundai Motor Co | Korea Computer vs. Hyundai Motor Co |
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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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.
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