Correlation Between Settlebank and Korea Computer

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

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

Diversification Opportunities for Settlebank and Korea Computer

-0.63

Correlation Coefficient

Settlebank  Korea Computer

Excellent diversification

The 3 months correlation between Settlebank and Korea is -0.63. Overlapping area represents the amount of risk that can be diversified away by holding Settlebank and Korea Computer Systems in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Korea Computer Systems and Settlebank 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 Settlebank are associated (or correlated) with Korea Computer. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Korea Computer Systems has no effect on the direction of Settlebank i.e., Settlebank and Korea Computer go up and down completely randomly.

Pair Corralation between Settlebank and Korea Computer

Assuming the 90 days trading horizon Settlebank is expected to under-perform the Korea Computer. But the stock apears to be less risky and, when comparing its historical volatility, Settlebank is 2.46 times less risky than Korea Computer. The stock trades about -0.08 of its potential returns per unit of risk. The Korea Computer Systems is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest  572,000  in Korea Computer Systems on September 13, 2024 and sell it today you would earn a total of  361,000  from holding Korea Computer Systems or generate 63.11% return on investment over 90 days.

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

Settlebank  vs.  Korea Computer Systems

Settlebank

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Settlebank has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Korea Computer Systems

Risk-Adjusted Performance

11 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Korea Computer Systems are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Korea Computer sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Settlebank and Korea Computer

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

The idea behind Settlebank and Korea Computer Systems 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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.