Correlation Between Moadata Co and Korea Computer

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

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

Diversification Opportunities for Moadata Co and Korea Computer

0.16

Correlation Coefficient

Moadata Co  Korea Computer

Average diversification

The 3 months correlation between Moadata and Korea is 0.16. Overlapping area represents the amount of risk that can be diversified away by holding Moadata Co and Korea Computer in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Korea Computer and Moadata Co 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 Moadata Co are associated (or correlated) with Korea Computer. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Korea Computer has no effect on the direction of Moadata Co i.e., Moadata Co and Korea Computer go up and down completely randomly.

Pair Corralation between Moadata Co and Korea Computer

Assuming the 90 days trading horizon Moadata Co is expected to under-perform the Korea Computer. In addition to that, Moadata Co is 1.33 times more volatile than Korea Computer. It trades about -0.09 of its total potential returns per unit of risk. Korea Computer is currently generating about 0.02 per unit of volatility. If you would invest  529,000  in Korea Computer on September 18, 2024 and sell it today you would earn a total of  3,000  from holding Korea Computer or generate 0.57% return on investment over 90 days.

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

Moadata Co  vs.  Korea Computer

Moadata Co

Risk-Adjusted Performance

0 of 100

Very Weak

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

Korea Computer

Risk-Adjusted Performance

1 of 100

Weak

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

Pair Trading with Moadata Co and Korea Computer

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

The idea behind Moadata Co and Korea Computer 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.