Correlation Between Pyung Hwa and Kumho Industrial

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

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

Diversification Opportunities for Pyung Hwa and Kumho Industrial

0.62

Correlation Coefficient

Pyung Hwa  Kumho Industrial

Poor diversification

The 3 months correlation between Pyung and Kumho is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding Pyung Hwa Industrial and Kumho Industrial Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kumho Industrial and Pyung Hwa 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 Pyung Hwa Industrial 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 Pyung Hwa i.e., Pyung Hwa and Kumho Industrial go up and down completely randomly.

Pair Corralation between Pyung Hwa and Kumho Industrial

Assuming the 90 days trading horizon Pyung Hwa Industrial is expected to generate 0.63 times more return on investment than Kumho Industrial. However, Pyung Hwa Industrial is 1.58 times less risky than Kumho Industrial. It trades about -0.08 of its potential returns per unit of risk. Kumho Industrial Co is currently generating about -0.07 per unit of risk. If you would invest  100,400  in Pyung Hwa Industrial on September 17, 2024 and sell it today you would lose (9,200) from holding Pyung Hwa Industrial or give up 9.16% of portfolio value over 90 days.

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

Pyung Hwa Industrial  vs.  Kumho Industrial Co

Pyung Hwa Industrial

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Pyung Hwa Industrial has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains 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 latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Pyung Hwa and Kumho Industrial

The main advantage of trading using opposite Pyung Hwa and Kumho Industrial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Pyung Hwa 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 Pyung Hwa Industrial 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 Global Correlations module to find global opportunities by holding instruments from different markets.