Correlation Between Pharmsville and KEPCO Engineering

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

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

Diversification Opportunities for Pharmsville and KEPCO Engineering

-0.19

Correlation Coefficient

Pharmsville  KEPCO Engineering

Good diversification

The 3 months correlation between Pharmsville and KEPCO is -0.19. Overlapping area represents the amount of risk that can be diversified away by holding Pharmsville Co and KEPCO Engineering Construction in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on KEPCO Engineering and Pharmsville 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 Pharmsville Co are associated (or correlated) with KEPCO Engineering. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of KEPCO Engineering has no effect on the direction of Pharmsville i.e., Pharmsville and KEPCO Engineering go up and down completely randomly.

Pair Corralation between Pharmsville and KEPCO Engineering

Assuming the 90 days trading horizon Pharmsville Co is expected to under-perform the KEPCO Engineering. But the stock apears to be less risky and, when comparing its historical volatility, Pharmsville Co is 1.09 times less risky than KEPCO Engineering. The stock trades about -0.09 of its potential returns per unit of risk. The KEPCO Engineering Construction is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  5,350,100  in KEPCO Engineering Construction on December 25, 2024 and sell it today you would earn a total of  739,900  from holding KEPCO Engineering Construction or generate 13.83% return on investment over 90 days.

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

Pharmsville Co  vs.  KEPCO Engineering Construction

Pharmsville

Risk-Adjusted Performance

Very Weak

Over the last 90 days Pharmsville 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.

KEPCO Engineering

Risk-Adjusted Performance

OK

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

Pair Trading with Pharmsville and KEPCO Engineering

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

The idea behind Pharmsville Co and KEPCO Engineering Construction 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.