Correlation Between Innowireless and Korean Drug

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

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

Diversification Opportunities for Innowireless and Korean Drug

0.43

Correlation Coefficient

Innowireless  Korean Drug

Very weak diversification

The 3 months correlation between Innowireless and Korean is 0.43. Overlapping area represents the amount of risk that can be diversified away by holding Innowireless Co and Korean Drug Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Korean Drug and Innowireless 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 Innowireless Co are associated (or correlated) with Korean Drug. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Korean Drug has no effect on the direction of Innowireless i.e., Innowireless and Korean Drug go up and down completely randomly.

Pair Corralation between Innowireless and Korean Drug

Assuming the 90 days trading horizon Innowireless Co is expected to under-perform the Korean Drug. In addition to that, Innowireless is 1.33 times more volatile than Korean Drug Co. It trades about -0.03 of its total potential returns per unit of risk. Korean Drug Co is currently generating about 0.02 per unit of volatility. If you would invest  455,000  in Korean Drug Co on December 26, 2024 and sell it today you would earn a total of  4,500  from holding Korean Drug Co or generate 0.99% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.28%
Values	Daily Returns

Innowireless Co  vs.  Korean Drug Co

Innowireless

Risk-Adjusted Performance

Very Weak

Over the last 90 days Innowireless Co has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Innowireless is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Korean Drug

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Korean Drug Co are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Korean Drug is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Innowireless and Korean Drug

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

The idea behind Innowireless Co and Korean Drug Co 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.