Correlation Between KNOTUS CoLtd and Korea Alcohol

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

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

Diversification Opportunities for KNOTUS CoLtd and Korea Alcohol

0.53

Correlation Coefficient

KNOTUS CoLtd  Korea Alcohol

Very weak diversification

The 3 months correlation between KNOTUS and Korea is 0.53. Overlapping area represents the amount of risk that can be diversified away by holding KNOTUS CoLtd 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 KNOTUS CoLtd 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 KNOTUS CoLtd 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 KNOTUS CoLtd i.e., KNOTUS CoLtd and Korea Alcohol go up and down completely randomly.

Pair Corralation between KNOTUS CoLtd and Korea Alcohol

Assuming the 90 days trading horizon KNOTUS CoLtd is expected to under-perform the Korea Alcohol. In addition to that, KNOTUS CoLtd is 1.59 times more volatile than Korea Alcohol Industrial. It trades about -0.02 of its total potential returns per unit of risk. Korea Alcohol Industrial is currently generating about -0.01 per unit of volatility. If you would invest  1,070,381  in Korea Alcohol Industrial on October 24, 2024 and sell it today you would lose (203,381) from holding Korea Alcohol Industrial or give up 19.0% of portfolio value over 90 days.

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

KNOTUS CoLtd  vs.  Korea Alcohol Industrial

KNOTUS CoLtd

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in KNOTUS CoLtd are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, KNOTUS CoLtd may actually be approaching a critical reversion point that can send shares even higher in February 2025.

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 somewhat strong basic indicators, Korea Alcohol is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with KNOTUS CoLtd and Korea Alcohol

The main advantage of trading using opposite KNOTUS CoLtd and Korea Alcohol positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if KNOTUS CoLtd 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 KNOTUS CoLtd 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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.