Correlation Between Korea New and CJ Cheiljedang

Can any of the company-specific risk be diversified away by investing in both Korea New and CJ Cheiljedang 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 CJ Cheiljedang 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 CJ Cheiljedang, you can compare the effects of market volatilities on Korea New and CJ Cheiljedang 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 CJ Cheiljedang. Check out your portfolio center. Please also check ongoing floating volatility patterns of Korea New and CJ Cheiljedang.

Diversification Opportunities for Korea New and CJ Cheiljedang

-0.44

Correlation Coefficient

Korea New  CJ Cheiljedang

Very good diversification

The 3 months correlation between Korea and 097950 is -0.44. Overlapping area represents the amount of risk that can be diversified away by holding Korea New Network and CJ Cheiljedang in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CJ Cheiljedang 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 CJ Cheiljedang. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CJ Cheiljedang has no effect on the direction of Korea New i.e., Korea New and CJ Cheiljedang go up and down completely randomly.

Pair Corralation between Korea New and CJ Cheiljedang

Assuming the 90 days trading horizon Korea New Network is expected to generate 1.51 times more return on investment than CJ Cheiljedang. However, Korea New is 1.51 times more volatile than CJ Cheiljedang. It trades about 0.14 of its potential returns per unit of risk. CJ Cheiljedang is currently generating about -0.11 per unit of risk. If you would invest  77,800  in Korea New Network on September 21, 2024 and sell it today you would earn a total of  7,700  from holding Korea New Network or generate 9.9% return on investment over 90 days.

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

Korea New Network  vs.  CJ Cheiljedang

Korea New Network

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Korea New Network are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Korea New sustained solid returns over the last few months and may actually be approaching a breakup point.

CJ Cheiljedang

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Korea New and CJ Cheiljedang

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

The idea behind Korea New Network and CJ Cheiljedang 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.