Correlation Between Korea Investment and CJ Cheiljedang

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

Diversification Opportunities for Korea Investment and CJ Cheiljedang

-0.58

Correlation Coefficient

Korea Investment  CJ Cheiljedang

Excellent diversification

The 3 months correlation between Korea and 097950 is -0.58. Overlapping area represents the amount of risk that can be diversified away by holding Korea Investment Holdings and CJ Cheiljedang in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CJ Cheiljedang 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 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 Investment i.e., Korea Investment and CJ Cheiljedang go up and down completely randomly.

Pair Corralation between Korea Investment and CJ Cheiljedang

Assuming the 90 days trading horizon Korea Investment Holdings is expected to generate 0.76 times more return on investment than CJ Cheiljedang. However, Korea Investment Holdings is 1.32 times less risky than CJ Cheiljedang. It trades about 0.08 of its potential returns per unit of risk. CJ Cheiljedang is currently generating about -0.03 per unit of risk. If you would invest  4,020,000  in Korea Investment Holdings on October 1, 2024 and sell it today you would earn a total of  1,240,000  from holding Korea Investment Holdings or generate 30.85% return on investment over 90 days.

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

Korea Investment Holdings  vs.  CJ Cheiljedang

Korea Investment Holdings

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Korea Investment Holdings are ranked lower than 4 (%) 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.

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 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.

Pair Trading with Korea Investment and CJ Cheiljedang

The main advantage of trading using opposite Korea Investment and CJ Cheiljedang positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Korea Investment 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 Investment Holdings 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.