Correlation Between Chinyang Hold and Korea Alcohol

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

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

Diversification Opportunities for Chinyang Hold and Korea Alcohol

0.06

Correlation Coefficient

Chinyang Hold  Korea Alcohol

Significant diversification

The 3 months correlation between Chinyang and Korea is 0.06. Overlapping area represents the amount of risk that can be diversified away by holding Chinyang Hold and Korea Alcohol Industrial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Korea Alcohol Industrial and Chinyang Hold 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 Chinyang Hold are associated (or correlated) with Korea Alcohol. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Korea Alcohol Industrial has no effect on the direction of Chinyang Hold i.e., Chinyang Hold and Korea Alcohol go up and down completely randomly.

Pair Corralation between Chinyang Hold and Korea Alcohol

Assuming the 90 days trading horizon Chinyang Hold is expected to under-perform the Korea Alcohol. But the stock apears to be less risky and, when comparing its historical volatility, Chinyang Hold is 1.02 times less risky than Korea Alcohol. The stock trades about -0.01 of its potential returns per unit of risk. The Korea Alcohol Industrial is currently generating about 0.24 of returns per unit of risk over similar time horizon. If you would invest  809,500  in Korea Alcohol Industrial on December 25, 2024 and sell it today you would earn a total of  110,500  from holding Korea Alcohol Industrial or generate 13.65% return on investment over 90 days.

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

Chinyang Hold  vs.  Korea Alcohol Industrial

Chinyang Hold

Risk-Adjusted Performance

Very Weak

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

Korea Alcohol Industrial

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Korea Alcohol Industrial are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Korea Alcohol sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Chinyang Hold and Korea Alcohol

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

The idea behind Chinyang Hold and Korea Alcohol 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.