Correlation Between Duksan Hi and Kumho Industrial

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

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

Diversification Opportunities for Duksan Hi and Kumho Industrial

0.77

Correlation Coefficient

Duksan Hi  Kumho Industrial

Poor diversification

The 3 months correlation between Duksan and Kumho is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding Duksan Hi Metal and Kumho Industrial Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kumho Industrial and Duksan Hi 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 Duksan Hi Metal are associated (or correlated) with Kumho Industrial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kumho Industrial has no effect on the direction of Duksan Hi i.e., Duksan Hi and Kumho Industrial go up and down completely randomly.

Pair Corralation between Duksan Hi and Kumho Industrial

Assuming the 90 days trading horizon Duksan Hi Metal is expected to under-perform the Kumho Industrial. In addition to that, Duksan Hi is 1.03 times more volatile than Kumho Industrial Co. It trades about -0.11 of its total potential returns per unit of risk. Kumho Industrial Co is currently generating about -0.03 per unit of volatility. If you would invest  287,500  in Kumho Industrial Co on October 6, 2024 and sell it today you would lose (18,500) from holding Kumho Industrial Co or give up 6.43% of portfolio value over 90 days.

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

Duksan Hi Metal  vs.  Kumho Industrial Co

Duksan Hi Metal

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Duksan Hi Metal 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 February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Kumho Industrial

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Kumho Industrial Co 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 February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Duksan Hi and Kumho Industrial

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

The idea behind Duksan Hi Metal and Kumho Industrial 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.

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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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.