Correlation Between Korea New and ICD

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

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

Diversification Opportunities for Korea New and ICD

0.3

Correlation Coefficient

Korea New  ICD

Weak diversification

The 3 months correlation between Korea and ICD is 0.3. Overlapping area represents the amount of risk that can be diversified away by holding Korea New Network and ICD Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ICD Co and Korea New 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 New Network are associated (or correlated) with ICD. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ICD Co has no effect on the direction of Korea New i.e., Korea New and ICD go up and down completely randomly.

Pair Corralation between Korea New and ICD

Assuming the 90 days trading horizon Korea New Network is expected to under-perform the ICD. But the stock apears to be less risky and, when comparing its historical volatility, Korea New Network is 5.17 times less risky than ICD. The stock trades about -0.1 of its potential returns per unit of risk. The ICD Co is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  436,500  in ICD Co on December 31, 2024 and sell it today you would earn a total of  7,500  from holding ICD Co or generate 1.72% return on investment over 90 days.

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

Korea New Network  vs.  ICD Co

Korea New Network

Risk-Adjusted Performance

Very Weak

Over the last 90 days Korea New Network has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

ICD Co

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in ICD Co are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, ICD may actually be approaching a critical reversion point that can send shares even higher in May 2025.

Pair Trading with Korea New and ICD

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

The idea behind Korea New Network and ICD 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.

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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.