Correlation Between KG Eco and Korea Electric

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

By analyzing existing cross correlation between KG Eco Technology and Korea Electric Power, you can compare the effects of market volatilities on KG Eco and Korea Electric 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 KG Eco with a short position of Korea Electric. Check out your portfolio center. Please also check ongoing floating volatility patterns of KG Eco and Korea Electric.

Diversification Opportunities for KG Eco and Korea Electric

0.68

Correlation Coefficient

KG Eco  Korea Electric

Poor diversification

The 3 months correlation between 151860 and Korea is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding KG Eco Technology and Korea Electric Power in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Korea Electric Power and KG Eco 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 KG Eco Technology are associated (or correlated) with Korea Electric. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Korea Electric Power has no effect on the direction of KG Eco i.e., KG Eco and Korea Electric go up and down completely randomly.

Pair Corralation between KG Eco and Korea Electric

Assuming the 90 days trading horizon KG Eco is expected to generate 1.86 times less return on investment than Korea Electric. In addition to that, KG Eco is 1.15 times more volatile than Korea Electric Power. It trades about 0.04 of its total potential returns per unit of risk. Korea Electric Power is currently generating about 0.09 per unit of volatility. If you would invest  2,033,443  in Korea Electric Power on December 24, 2024 and sell it today you would earn a total of  176,557  from holding Korea Electric Power or generate 8.68% return on investment over 90 days.

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

KG Eco Technology  vs.  Korea Electric Power

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 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, KG Eco is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Korea Electric Power

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Korea Electric Power are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Korea Electric may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with KG Eco and Korea Electric

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

The idea behind KG Eco Technology and Korea Electric Power 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.

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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.