Correlation Between Choong Ang and Kolon Life

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

By analyzing existing cross correlation between Choong Ang Vaccine and Kolon Life Science, you can compare the effects of market volatilities on Choong Ang and Kolon Life 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 Choong Ang with a short position of Kolon Life. Check out your portfolio center. Please also check ongoing floating volatility patterns of Choong Ang and Kolon Life.

Diversification Opportunities for Choong Ang and Kolon Life

0.42

Correlation Coefficient

Choong Ang  Kolon Life

Very weak diversification

The 3 months correlation between Choong and Kolon is 0.42. Overlapping area represents the amount of risk that can be diversified away by holding Choong Ang Vaccine and Kolon Life Science in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kolon Life Science and Choong Ang 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 Choong Ang Vaccine are associated (or correlated) with Kolon Life. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kolon Life Science has no effect on the direction of Choong Ang i.e., Choong Ang and Kolon Life go up and down completely randomly.

Pair Corralation between Choong Ang and Kolon Life

Assuming the 90 days trading horizon Choong Ang is expected to generate 12.03 times less return on investment than Kolon Life. But when comparing it to its historical volatility, Choong Ang Vaccine is 4.39 times less risky than Kolon Life. It trades about 0.07 of its potential returns per unit of risk. Kolon Life Science is currently generating about 0.19 of returns per unit of risk over similar time horizon. If you would invest  2,215,000  in Kolon Life Science on December 2, 2024 and sell it today you would earn a total of  395,000  from holding Kolon Life Science or generate 17.83% return on investment over 90 days.

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

Choong Ang Vaccine  vs.  Kolon Life Science

Choong Ang Vaccine

Risk-Adjusted Performance

Weak

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

Kolon Life Science

Risk-Adjusted Performance

OK

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

Pair Trading with Choong Ang and Kolon Life

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

The idea behind Choong Ang Vaccine and Kolon Life Science 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.