Correlation Between CJ Cheiljedang and Kyeryong Construction

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

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

Diversification Opportunities for CJ Cheiljedang and Kyeryong Construction

0.87

Correlation Coefficient

CJ Cheiljedang  Kyeryong Construction

Very poor diversification

The 3 months correlation between 097950 and Kyeryong is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding CJ Cheiljedang and Kyeryong Construction Industri in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kyeryong Construction and CJ Cheiljedang 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 CJ Cheiljedang are associated (or correlated) with Kyeryong Construction. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kyeryong Construction has no effect on the direction of CJ Cheiljedang i.e., CJ Cheiljedang and Kyeryong Construction go up and down completely randomly.

Pair Corralation between CJ Cheiljedang and Kyeryong Construction

Assuming the 90 days trading horizon CJ Cheiljedang is expected to generate 1.2 times more return on investment than Kyeryong Construction. However, CJ Cheiljedang is 1.2 times more volatile than Kyeryong Construction Industrial. It trades about -0.02 of its potential returns per unit of risk. Kyeryong Construction Industrial is currently generating about -0.04 per unit of risk. If you would invest  33,364,000  in CJ Cheiljedang on October 4, 2024 and sell it today you would lose (7,814,000) from holding CJ Cheiljedang or give up 23.42% of portfolio value over 90 days.

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

CJ Cheiljedang  vs.  Kyeryong Construction Industri

CJ Cheiljedang

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days CJ Cheiljedang 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.

Kyeryong Construction

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Kyeryong Construction 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.

Pair Trading with CJ Cheiljedang and Kyeryong Construction

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

The idea behind CJ Cheiljedang and Kyeryong Construction Industrial 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.