Correlation Between Fine Besteel and Korea Real

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

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

Diversification Opportunities for Fine Besteel and Korea Real

0.2

Correlation Coefficient

Fine Besteel  Korea Real

Modest diversification

The 3 months correlation between Fine and Korea is 0.2. Overlapping area represents the amount of risk that can be diversified away by holding Fine Besteel Co and Korea Real Estate in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Korea Real Estate and Fine Besteel 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 Fine Besteel Co are associated (or correlated) with Korea Real. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Korea Real Estate has no effect on the direction of Fine Besteel i.e., Fine Besteel and Korea Real go up and down completely randomly.

Pair Corralation between Fine Besteel and Korea Real

Assuming the 90 days trading horizon Fine Besteel Co is expected to generate 4.15 times more return on investment than Korea Real. However, Fine Besteel is 4.15 times more volatile than Korea Real Estate. It trades about 0.07 of its potential returns per unit of risk. Korea Real Estate is currently generating about 0.14 per unit of risk. If you would invest  101,200  in Fine Besteel Co on December 1, 2024 and sell it today you would earn a total of  10,100  from holding Fine Besteel Co or generate 9.98% return on investment over 90 days.

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

Fine Besteel Co  vs.  Korea Real Estate

Fine Besteel

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Fine Besteel Co are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Fine Besteel sustained solid returns over the last few months and may actually be approaching a breakup point.

Korea Real Estate

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Korea Real Estate are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Korea Real is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Fine Besteel and Korea Real

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

The idea behind Fine Besteel Co and Korea Real Estate 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 Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.