Correlation Between Korea Investment and Finebesteel

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

Diversification Opportunities for Korea Investment and Finebesteel

0.64

Correlation Coefficient

Korea Investment  Finebesteel

Poor diversification

The 3 months correlation between Korea and Finebesteel is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding Korea Investment Holdings and Finebesteel in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Finebesteel 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 Finebesteel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Finebesteel has no effect on the direction of Korea Investment i.e., Korea Investment and Finebesteel go up and down completely randomly.

Pair Corralation between Korea Investment and Finebesteel

Assuming the 90 days trading horizon Korea Investment is expected to generate 2.42 times less return on investment than Finebesteel. But when comparing it to its historical volatility, Korea Investment Holdings is 2.39 times less risky than Finebesteel. It trades about 0.12 of its potential returns per unit of risk. Finebesteel is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  83,800  in Finebesteel on September 12, 2024 and sell it today you would earn a total of  19,200  from holding Finebesteel or generate 22.91% return on investment over 90 days.

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

Korea Investment Holdings  vs.  Finebesteel

Korea Investment Holdings

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Korea Investment Holdings are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Korea Investment may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Finebesteel

Risk-Adjusted Performance

9 of 100

OK

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

Pair Trading with Korea Investment and Finebesteel

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

The idea behind Korea Investment Holdings and Finebesteel 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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.