Correlation Between Jeju Beer and Formetal

Can any of the company-specific risk be diversified away by investing in both Jeju Beer and Formetal 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 Formetal 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 Formetal Co, you can compare the effects of market volatilities on Jeju Beer and Formetal 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 Formetal. Check out your portfolio center. Please also check ongoing floating volatility patterns of Jeju Beer and Formetal.

Diversification Opportunities for Jeju Beer and Formetal

-0.24

Correlation Coefficient

Jeju Beer  Formetal

Very good diversification

The 3 months correlation between Jeju and Formetal is -0.24. Overlapping area represents the amount of risk that can be diversified away by holding Jeju Beer Co and Formetal Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Formetal 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 Formetal. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Formetal has no effect on the direction of Jeju Beer i.e., Jeju Beer and Formetal go up and down completely randomly.

Pair Corralation between Jeju Beer and Formetal

Assuming the 90 days trading horizon Jeju Beer Co is expected to under-perform the Formetal. In addition to that, Jeju Beer is 2.07 times more volatile than Formetal Co. It trades about -0.02 of its total potential returns per unit of risk. Formetal Co is currently generating about 0.01 per unit of volatility. If you would invest  359,219  in Formetal Co on October 7, 2024 and sell it today you would lose (3,719) from holding Formetal Co or give up 1.04% 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.  Formetal Co

Jeju Beer

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Jeju Beer Co are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Jeju Beer is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Formetal

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Formetal Co are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Formetal sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Jeju Beer and Formetal

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

The idea behind Jeju Beer Co and Formetal Co 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.