Correlation Between Korea Investment and FnGuide

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

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

Diversification Opportunities for Korea Investment and FnGuide

-0.63

Correlation Coefficient

Korea Investment  FnGuide

Excellent diversification

The 3 months correlation between Korea and FnGuide is -0.63. Overlapping area represents the amount of risk that can be diversified away by holding Korea Investment Holdings and FnGuide in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FnGuide and Korea Investment 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 Investment Holdings are associated (or correlated) with FnGuide. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of FnGuide has no effect on the direction of Korea Investment i.e., Korea Investment and FnGuide go up and down completely randomly.

Pair Corralation between Korea Investment and FnGuide

Assuming the 90 days trading horizon Korea Investment is expected to generate 2.52 times less return on investment than FnGuide. But when comparing it to its historical volatility, Korea Investment Holdings is 3.55 times less risky than FnGuide. It trades about 0.06 of its potential returns per unit of risk. FnGuide is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  623,304  in FnGuide on September 23, 2024 and sell it today you would earn a total of  190,696  from holding FnGuide or generate 30.59% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	99.62%
Values	Daily Returns

Korea Investment Holdings  vs.  FnGuide

Korea Investment Holdings

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Korea Investment Holdings are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Korea Investment is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

FnGuide

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days FnGuide 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 Investment and FnGuide

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

The idea behind Korea Investment Holdings and FnGuide 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.