Correlation Between PlayD Co and Korea Alcohol

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

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

Diversification Opportunities for PlayD Co and Korea Alcohol

-0.39

Correlation Coefficient

PlayD Co  Korea Alcohol

Very good diversification

The 3 months correlation between PlayD and Korea is -0.39. Overlapping area represents the amount of risk that can be diversified away by holding PlayD Co and Korea Alcohol Industrial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Korea Alcohol Industrial and PlayD Co 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 PlayD Co are associated (or correlated) with Korea Alcohol. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Korea Alcohol Industrial has no effect on the direction of PlayD Co i.e., PlayD Co and Korea Alcohol go up and down completely randomly.

Pair Corralation between PlayD Co and Korea Alcohol

Assuming the 90 days trading horizon PlayD Co is expected to generate 1.21 times more return on investment than Korea Alcohol. However, PlayD Co is 1.21 times more volatile than Korea Alcohol Industrial. It trades about -0.04 of its potential returns per unit of risk. Korea Alcohol Industrial is currently generating about -0.07 per unit of risk. If you would invest  587,000  in PlayD Co on September 28, 2024 and sell it today you would lose (16,000) from holding PlayD Co or give up 2.73% of portfolio value over 90 days.

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

PlayD Co  vs.  Korea Alcohol Industrial

PlayD Co

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in PlayD Co are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, PlayD Co sustained solid returns over the last few months and may actually be approaching a breakup point.

Korea Alcohol Industrial

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Korea Alcohol Industrial 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.

Pair Trading with PlayD Co and Korea Alcohol

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

The idea behind PlayD Co and Korea Alcohol Industrial 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.