Correlation Between Miwon Chemical and Kg Chemical

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

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

Diversification Opportunities for Miwon Chemical and Kg Chemical

0.17

Correlation Coefficient

Miwon Chemical  Kg Chemical

Average diversification

The 3 months correlation between Miwon and 001390 is 0.17. Overlapping area represents the amount of risk that can be diversified away by holding Miwon Chemical and Kg Chemical in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kg Chemical and Miwon Chemical 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 Miwon Chemical are associated (or correlated) with Kg Chemical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kg Chemical has no effect on the direction of Miwon Chemical i.e., Miwon Chemical and Kg Chemical go up and down completely randomly.

Pair Corralation between Miwon Chemical and Kg Chemical

Assuming the 90 days trading horizon Miwon Chemical is expected to generate 1.48 times less return on investment than Kg Chemical. But when comparing it to its historical volatility, Miwon Chemical is 1.7 times less risky than Kg Chemical. It trades about 0.05 of its potential returns per unit of risk. Kg Chemical is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  367,500  in Kg Chemical on December 25, 2024 and sell it today you would earn a total of  13,000  from holding Kg Chemical or generate 3.54% return on investment over 90 days.

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

Miwon Chemical  vs.  Kg Chemical

Miwon Chemical

Risk-Adjusted Performance

Modest

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

Kg Chemical

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Kg Chemical are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Kg Chemical is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Miwon Chemical and Kg Chemical

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

The idea behind Miwon Chemical and Kg Chemical 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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.