Correlation Between InnoTherapy and Kolon Life

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

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

Diversification Opportunities for InnoTherapy and Kolon Life

0.3

Correlation Coefficient

InnoTherapy  Kolon Life

Weak diversification

The 3 months correlation between InnoTherapy and Kolon is 0.3. Overlapping area represents the amount of risk that can be diversified away by holding InnoTherapy and Kolon Life Science in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kolon Life Science and InnoTherapy 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 InnoTherapy are associated (or correlated) with Kolon Life. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kolon Life Science has no effect on the direction of InnoTherapy i.e., InnoTherapy and Kolon Life go up and down completely randomly.

Pair Corralation between InnoTherapy and Kolon Life

Assuming the 90 days trading horizon InnoTherapy is expected to generate 0.86 times more return on investment than Kolon Life. However, InnoTherapy is 1.17 times less risky than Kolon Life. It trades about 0.02 of its potential returns per unit of risk. Kolon Life Science is currently generating about 0.01 per unit of risk. If you would invest  817,000  in InnoTherapy on December 5, 2024 and sell it today you would earn a total of  67,000  from holding InnoTherapy or generate 8.2% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	99.79%
Values	Daily Returns

InnoTherapy  vs.  Kolon Life Science

InnoTherapy

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in InnoTherapy are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, InnoTherapy is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Kolon Life Science

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Kolon Life Science are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Kolon Life sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with InnoTherapy and Kolon Life

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

The idea behind InnoTherapy and Kolon Life Science 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.