Correlation Between Mercury Corp and KakaoBank Corp

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

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

Diversification Opportunities for Mercury Corp and KakaoBank Corp

-0.44

Correlation Coefficient

Mercury Corp  KakaoBank Corp

Very good diversification

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

Pair Corralation between Mercury Corp and KakaoBank Corp

Assuming the 90 days trading horizon Mercury Corp is expected to under-perform the KakaoBank Corp. In addition to that, Mercury Corp is 1.18 times more volatile than KakaoBank Corp. It trades about -0.14 of its total potential returns per unit of risk. KakaoBank Corp is currently generating about 0.07 per unit of volatility. If you would invest  2,148,795  in KakaoBank Corp on December 26, 2024 and sell it today you would earn a total of  166,205  from holding KakaoBank Corp or generate 7.73% return on investment over 90 days.

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

Mercury Corp  vs.  KakaoBank Corp

Mercury Corp

Risk-Adjusted Performance

Very Weak

Over the last 90 days Mercury Corp 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 April 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

KakaoBank Corp

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in KakaoBank Corp are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, KakaoBank Corp may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Mercury Corp and KakaoBank Corp

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

The idea behind Mercury Corp and KakaoBank Corp 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.