Correlation Between Korea Computer and Microfriend

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

By analyzing existing cross correlation between Korea Computer and Microfriend, you can compare the effects of market volatilities on Korea Computer and Microfriend 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 Microfriend. Check out your portfolio center. Please also check ongoing floating volatility patterns of Korea Computer and Microfriend.

Diversification Opportunities for Korea Computer and Microfriend

0.17

Correlation Coefficient

Korea Computer  Microfriend

Average diversification

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

Pair Corralation between Korea Computer and Microfriend

Assuming the 90 days trading horizon Korea Computer is expected to generate 0.6 times more return on investment than Microfriend. However, Korea Computer is 1.67 times less risky than Microfriend. It trades about 0.05 of its potential returns per unit of risk. Microfriend is currently generating about -0.06 per unit of risk. If you would invest  500,501  in Korea Computer on October 9, 2024 and sell it today you would earn a total of  30,499  from holding Korea Computer or generate 6.09% return on investment over 90 days.

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

Korea Computer  vs.  Microfriend

Korea Computer

Risk-Adjusted Performance

3 of 100

Insignificant

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

Microfriend

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Microfriend 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 February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Korea Computer and Microfriend

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

The idea behind Korea Computer and Microfriend 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..