Correlation Between Kolon Plastics and Samick Musical

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

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

Diversification Opportunities for Kolon Plastics and Samick Musical

0.55

Correlation Coefficient

Kolon Plastics  Samick Musical

Very weak diversification

The 3 months correlation between Kolon and Samick is 0.55. Overlapping area represents the amount of risk that can be diversified away by holding Kolon Plastics and Samick Musical Instruments in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Samick Musical Instr and Kolon Plastics 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 Plastics are associated (or correlated) with Samick Musical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Samick Musical Instr has no effect on the direction of Kolon Plastics i.e., Kolon Plastics and Samick Musical go up and down completely randomly.

Pair Corralation between Kolon Plastics and Samick Musical

Assuming the 90 days trading horizon Kolon Plastics is expected to generate 0.44 times more return on investment than Samick Musical. However, Kolon Plastics is 2.26 times less risky than Samick Musical. It trades about 0.17 of its potential returns per unit of risk. Samick Musical Instruments is currently generating about 0.07 per unit of risk. If you would invest  511,968  in Kolon Plastics on December 11, 2024 and sell it today you would earn a total of  93,032  from holding Kolon Plastics or generate 18.17% return on investment over 90 days.

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

Kolon Plastics  vs.  Samick Musical Instruments

Kolon Plastics

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Kolon Plastics are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Kolon Plastics sustained solid returns over the last few months and may actually be approaching a breakup point.

Samick Musical Instr

Risk-Adjusted Performance

Modest

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

Pair Trading with Kolon Plastics and Samick Musical

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

The idea behind Kolon Plastics and Samick Musical Instruments 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.