Correlation Between ENERGYMACHINERY KOREA and Korea Refract

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

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

Diversification Opportunities for ENERGYMACHINERY KOREA and Korea Refract

0.71

Correlation Coefficient

ENERGYMACHINERY KOREA  Korea Refract

Poor diversification

The 3 months correlation between ENERGYMACHINERY and Korea is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding ENERGYMACHINERY KOREA CoLtd and Korea Refract in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Korea Refract and ENERGYMACHINERY KOREA 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 ENERGYMACHINERY KOREA CoLtd are associated (or correlated) with Korea Refract. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Korea Refract has no effect on the direction of ENERGYMACHINERY KOREA i.e., ENERGYMACHINERY KOREA and Korea Refract go up and down completely randomly.

Pair Corralation between ENERGYMACHINERY KOREA and Korea Refract

Assuming the 90 days trading horizon ENERGYMACHINERY KOREA CoLtd is expected to generate 1.94 times more return on investment than Korea Refract. However, ENERGYMACHINERY KOREA is 1.94 times more volatile than Korea Refract. It trades about 0.02 of its potential returns per unit of risk. Korea Refract is currently generating about -0.07 per unit of risk. If you would invest  225,000  in ENERGYMACHINERY KOREA CoLtd on October 5, 2024 and sell it today you would lose (500.00) from holding ENERGYMACHINERY KOREA CoLtd or give up 0.22% of portfolio value over 90 days.

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

ENERGYMACHINERY KOREA CoLtd  vs.  Korea Refract

ENERGYMACHINERY KOREA

Risk-Adjusted Performance

0 of 100

Very Weak

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

Korea Refract

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with ENERGYMACHINERY KOREA and Korea Refract

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

The idea behind ENERGYMACHINERY KOREA CoLtd and Korea Refract 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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.