Correlation Between KM and Korea Refractories

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

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

Diversification Opportunities for KM and Korea Refractories

0.44

Correlation Coefficient

KM  Korea Refractories

Very weak diversification

The 3 months correlation between KM and Korea is 0.44. Overlapping area represents the amount of risk that can be diversified away by holding KM Corp. and Korea Refractories Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Korea Refractories and KM 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 KM Corporation are associated (or correlated) with Korea Refractories. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Korea Refractories has no effect on the direction of KM i.e., KM and Korea Refractories go up and down completely randomly.

Pair Corralation between KM and Korea Refractories

Assuming the 90 days trading horizon KM Corporation is expected to generate 2.15 times more return on investment than Korea Refractories. However, KM is 2.15 times more volatile than Korea Refractories Co. It trades about 0.0 of its potential returns per unit of risk. Korea Refractories Co is currently generating about -0.01 per unit of risk. If you would invest  299,500  in KM Corporation on December 30, 2024 and sell it today you would lose (5,500) from holding KM Corporation or give up 1.84% of portfolio value over 90 days.

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

KM Corp.  vs.  Korea Refractories Co

KM Corporation

Risk-Adjusted Performance

Very Weak

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

Korea Refractories

Risk-Adjusted Performance

Very Weak

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

Pair Trading with KM and Korea Refractories

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

The idea behind KM Corporation and Korea Refractories 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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..