Correlation Between Kolon Plastics and KG Eco

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

By analyzing existing cross correlation between Kolon Plastics and KG Eco Technology, you can compare the effects of market volatilities on Kolon Plastics and KG Eco 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 KG Eco. Check out your portfolio center. Please also check ongoing floating volatility patterns of Kolon Plastics and KG Eco.

Diversification Opportunities for Kolon Plastics and KG Eco

0.8

Correlation Coefficient

Kolon Plastics  KG Eco

Very poor diversification

The 3 months correlation between Kolon and 151860 is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Kolon Plastics and KG Eco Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on KG Eco Technology 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 KG Eco. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of KG Eco Technology has no effect on the direction of Kolon Plastics i.e., Kolon Plastics and KG Eco go up and down completely randomly.

Pair Corralation between Kolon Plastics and KG Eco

Assuming the 90 days trading horizon Kolon Plastics is expected to generate 0.88 times more return on investment than KG Eco. However, Kolon Plastics is 1.13 times less risky than KG Eco. It trades about 0.14 of its potential returns per unit of risk. KG Eco Technology is currently generating about 0.06 per unit of risk. If you would invest  538,000  in Kolon Plastics on December 25, 2024 and sell it today you would earn a total of  76,000  from holding Kolon Plastics or generate 14.13% return on investment over 90 days.

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

Kolon Plastics  vs.  KG Eco Technology

Kolon Plastics

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Kolon Plastics are ranked lower than 10 (%) 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.

KG Eco Technology

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in KG Eco Technology are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, KG Eco may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Kolon Plastics and KG Eco

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

The idea behind Kolon Plastics and KG Eco Technology 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.