Correlation Between Innodep and Kumho Industrial

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

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

Diversification Opportunities for Innodep and Kumho Industrial

0.62

Correlation Coefficient

Innodep  Kumho Industrial

Poor diversification

The 3 months correlation between Innodep and Kumho is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding Innodep and Kumho Industrial Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kumho Industrial and Innodep 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 Innodep are associated (or correlated) with Kumho Industrial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kumho Industrial has no effect on the direction of Innodep i.e., Innodep and Kumho Industrial go up and down completely randomly.

Pair Corralation between Innodep and Kumho Industrial

Assuming the 90 days trading horizon Innodep is expected to generate 1.29 times more return on investment than Kumho Industrial. However, Innodep is 1.29 times more volatile than Kumho Industrial Co. It trades about -0.06 of its potential returns per unit of risk. Kumho Industrial Co is currently generating about -0.07 per unit of risk. If you would invest  947,000  in Innodep on September 14, 2024 and sell it today you would lose (237,000) from holding Innodep or give up 25.03% of portfolio value over 90 days.

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

Innodep  vs.  Kumho Industrial Co

Innodep

Risk-Adjusted Performance

0 of 100

Very Weak

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

Kumho Industrial

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Kumho Industrial Co has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Innodep and Kumho Industrial

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

The idea behind Innodep and Kumho Industrial 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.