Correlation Between Kolon Life and FNC Entertainment

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

By analyzing existing cross correlation between Kolon Life Science and FNC Entertainment Co, you can compare the effects of market volatilities on Kolon Life and FNC Entertainment 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 Kolon Life with a short position of FNC Entertainment. Check out your portfolio center. Please also check ongoing floating volatility patterns of Kolon Life and FNC Entertainment.

Diversification Opportunities for Kolon Life and FNC Entertainment

0.61

Correlation Coefficient

Kolon Life  FNC Entertainment

Poor diversification

The 3 months correlation between Kolon and FNC is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding Kolon Life Science and FNC Entertainment Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FNC Entertainment and Kolon Life 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 Kolon Life Science are associated (or correlated) with FNC Entertainment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of FNC Entertainment has no effect on the direction of Kolon Life i.e., Kolon Life and FNC Entertainment go up and down completely randomly.

Pair Corralation between Kolon Life and FNC Entertainment

Assuming the 90 days trading horizon Kolon Life Science is expected to generate 1.54 times more return on investment than FNC Entertainment. However, Kolon Life is 1.54 times more volatile than FNC Entertainment Co. It trades about 0.12 of its potential returns per unit of risk. FNC Entertainment Co is currently generating about 0.05 per unit of risk. If you would invest  2,300,000  in Kolon Life Science on December 28, 2024 and sell it today you would earn a total of  630,000  from holding Kolon Life Science or generate 27.39% return on investment over 90 days.

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

Kolon Life Science  vs.  FNC Entertainment Co

Kolon Life Science

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Kolon Life Science are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Kolon Life sustained solid returns over the last few months and may actually be approaching a breakup point.

FNC Entertainment

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in FNC Entertainment Co are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, FNC Entertainment may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Kolon Life and FNC Entertainment

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

The idea behind Kolon Life Science and FNC Entertainment Co 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 Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.