Correlation Between Finebesteel and Kumho Industrial

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

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

Diversification Opportunities for Finebesteel and Kumho Industrial

-0.57

Correlation Coefficient

Finebesteel  Kumho Industrial

Excellent diversification

The 3 months correlation between Finebesteel and Kumho is -0.57. Overlapping area represents the amount of risk that can be diversified away by holding Finebesteel and Kumho Industrial Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kumho Industrial and Finebesteel 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 Finebesteel are associated (or correlated) with Kumho Industrial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kumho Industrial has no effect on the direction of Finebesteel i.e., Finebesteel and Kumho Industrial go up and down completely randomly.

Pair Corralation between Finebesteel and Kumho Industrial

Assuming the 90 days trading horizon Finebesteel is expected to generate 1.28 times more return on investment than Kumho Industrial. However, Finebesteel is 1.28 times more volatile than Kumho Industrial Co. It trades about -0.04 of its potential returns per unit of risk. Kumho Industrial Co is currently generating about -0.07 per unit of risk. If you would invest  207,500  in Finebesteel on September 20, 2024 and sell it today you would lose (105,800) from holding Finebesteel or give up 50.99% of portfolio value over 90 days.

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

Finebesteel  vs.  Kumho Industrial Co

Finebesteel

Risk-Adjusted Performance

9 of 100

OK

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

Kumho Industrial

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Kumho Industrial Co 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 January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Finebesteel and Kumho Industrial

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

The idea behind Finebesteel and Kumho Industrial 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.