Correlation Between Alton Sports and Kosdaq Composite

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

By analyzing existing cross correlation between Alton Sports CoLtd and Kosdaq Composite Index, you can compare the effects of market volatilities on Alton Sports and Kosdaq Composite 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 Alton Sports with a short position of Kosdaq Composite. Check out your portfolio center. Please also check ongoing floating volatility patterns of Alton Sports and Kosdaq Composite.

Diversification Opportunities for Alton Sports and Kosdaq Composite

0.94

Correlation Coefficient

Alton Sports  Kosdaq Composite

Almost no diversification

The 3 months correlation between Alton and Kosdaq is 0.94. Overlapping area represents the amount of risk that can be diversified away by holding Alton Sports CoLtd and Kosdaq Composite Index in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kosdaq Composite Index and Alton Sports 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 Alton Sports CoLtd are associated (or correlated) with Kosdaq Composite. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kosdaq Composite Index has no effect on the direction of Alton Sports i.e., Alton Sports and Kosdaq Composite go up and down completely randomly.

Pair Corralation between Alton Sports and Kosdaq Composite

Assuming the 90 days trading horizon Alton Sports CoLtd is expected to under-perform the Kosdaq Composite. In addition to that, Alton Sports is 1.59 times more volatile than Kosdaq Composite Index. It trades about -0.09 of its total potential returns per unit of risk. Kosdaq Composite Index is currently generating about -0.01 per unit of volatility. If you would invest  76,133  in Kosdaq Composite Index on September 26, 2024 and sell it today you would lose (8,122) from holding Kosdaq Composite Index or give up 10.67% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	99.78%
Values	Daily Returns

Alton Sports CoLtd  vs.  Kosdaq Composite Index

Pair Trading with Alton Sports and Kosdaq Composite

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

The idea behind Alton Sports CoLtd and Kosdaq Composite Index 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.