Correlation Between Haitai Confectionery and Kyeryong Construction

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

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

Diversification Opportunities for Haitai Confectionery and Kyeryong Construction

0.86

Correlation Coefficient

Haitai Confectionery  Kyeryong Construction

Very poor diversification

The 3 months correlation between Haitai and Kyeryong is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding Haitai Confectionery Foods and Kyeryong Construction Industri in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kyeryong Construction and Haitai Confectionery 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 Haitai Confectionery Foods 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 Haitai Confectionery i.e., Haitai Confectionery and Kyeryong Construction go up and down completely randomly.

Pair Corralation between Haitai Confectionery and Kyeryong Construction

Assuming the 90 days trading horizon Haitai Confectionery Foods is expected to generate 1.11 times more return on investment than Kyeryong Construction. However, Haitai Confectionery is 1.11 times more volatile than Kyeryong Construction Industrial. It trades about 0.07 of its potential returns per unit of risk. Kyeryong Construction Industrial is currently generating about 0.06 per unit of risk. If you would invest  614,905  in Haitai Confectionery Foods on December 24, 2024 and sell it today you would earn a total of  30,095  from holding Haitai Confectionery Foods or generate 4.89% return on investment over 90 days.

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

Haitai Confectionery Foods  vs.  Kyeryong Construction Industri

Haitai Confectionery

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Haitai Confectionery Foods are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Haitai Confectionery is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Kyeryong Construction

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Kyeryong Construction Industrial are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Kyeryong Construction is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Haitai Confectionery and Kyeryong Construction

The main advantage of trading using opposite Haitai Confectionery and Kyeryong Construction positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Haitai Confectionery 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 Haitai Confectionery Foods 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.