Correlation Between Samsung KODEX and Finebesteel

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

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

Diversification Opportunities for Samsung KODEX and Finebesteel

-0.7

Correlation Coefficient

Samsung KODEX  Finebesteel

Excellent diversification

The 3 months correlation between Samsung and Finebesteel is -0.7. Overlapping area represents the amount of risk that can be diversified away by holding Samsung KODEX IT and Finebesteel in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Finebesteel and Samsung KODEX 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 Samsung KODEX IT are associated (or correlated) with Finebesteel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Finebesteel has no effect on the direction of Samsung KODEX i.e., Samsung KODEX and Finebesteel go up and down completely randomly.

Pair Corralation between Samsung KODEX and Finebesteel

Assuming the 90 days trading horizon Samsung KODEX IT is expected to under-perform the Finebesteel. But the etf apears to be less risky and, when comparing its historical volatility, Samsung KODEX IT is 1.9 times less risky than Finebesteel. The etf trades about -0.02 of its potential returns per unit of risk. The Finebesteel is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  87,100  in Finebesteel on October 22, 2024 and sell it today you would earn a total of  12,800  from holding Finebesteel or generate 14.7% return on investment over 90 days.

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

Samsung KODEX IT  vs.  Finebesteel

Samsung KODEX IT

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Samsung KODEX IT has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Samsung KODEX is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Finebesteel

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Finebesteel are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Finebesteel sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Samsung KODEX and Finebesteel

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

The idea behind Samsung KODEX IT and Finebesteel 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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.