Correlation Between Jeju Beer and Korea Electronic

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

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

Diversification Opportunities for Jeju Beer and Korea Electronic

-0.17

Correlation Coefficient

Jeju Beer  Korea Electronic

Good diversification

The 3 months correlation between Jeju and Korea is -0.17. Overlapping area represents the amount of risk that can be diversified away by holding Jeju Beer Co and Korea Electronic Certification in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Korea Electronic Cer and Jeju Beer 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 Jeju Beer Co are associated (or correlated) with Korea Electronic. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Korea Electronic Cer has no effect on the direction of Jeju Beer i.e., Jeju Beer and Korea Electronic go up and down completely randomly.

Pair Corralation between Jeju Beer and Korea Electronic

Assuming the 90 days trading horizon Jeju Beer Co is expected to under-perform the Korea Electronic. In addition to that, Jeju Beer is 1.85 times more volatile than Korea Electronic Certification. It trades about -0.04 of its total potential returns per unit of risk. Korea Electronic Certification is currently generating about -0.03 per unit of volatility. If you would invest  492,616  in Korea Electronic Certification on October 24, 2024 and sell it today you would lose (171,616) from holding Korea Electronic Certification or give up 34.84% of portfolio value over 90 days.

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

Jeju Beer Co  vs.  Korea Electronic Certification

Jeju Beer

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Jeju Beer Co are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Jeju Beer may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Korea Electronic Cer

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Jeju Beer and Korea Electronic

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

The idea behind Jeju Beer Co and Korea Electronic Certification 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.