Correlation Between Kolon Plastics and Synopex
Can any of the company-specific risk be diversified away by investing in both Kolon Plastics and Synopex 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 Synopex into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Kolon Plastics and Synopex, you can compare the effects of market volatilities on Kolon Plastics and Synopex 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 Synopex. Check out your portfolio center. Please also check ongoing floating volatility patterns of Kolon Plastics and Synopex.
Diversification Opportunities for Kolon Plastics and Synopex
0.8 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Kolon and Synopex is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Kolon Plastics and Synopex in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Synopex 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 Synopex. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Synopex has no effect on the direction of Kolon Plastics i.e., Kolon Plastics and Synopex go up and down completely randomly.
Pair Corralation between Kolon Plastics and Synopex
Assuming the 90 days trading horizon Kolon Plastics is expected to under-perform the Synopex. But the stock apears to be less risky and, when comparing its historical volatility, Kolon Plastics is 1.62 times less risky than Synopex. The stock trades about -0.02 of its potential returns per unit of risk. The Synopex is currently generating about -0.01 of returns per unit of risk over similar time horizon. If you would invest 657,142 in Synopex on October 21, 2024 and sell it today you would lose (48,142) from holding Synopex or give up 7.33% of portfolio value over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Strong |
Accuracy | 100.0% |
Values | Daily Returns |
Kolon Plastics vs. Synopex
Performance |
Timeline |
Kolon Plastics |
Synopex |
Kolon Plastics and Synopex Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Kolon Plastics and Synopex
The main advantage of trading using opposite Kolon Plastics and Synopex positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Kolon Plastics position performs unexpectedly, Synopex 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 Synopex will offset losses from the drop in Synopex's long position.Kolon Plastics vs. Sung Bo Chemicals | ||
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Check out your portfolio center.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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.
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