Correlation Between KakaoBank Corp and GemVaxKAEL CoLtd

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Can any of the company-specific risk be diversified away by investing in both KakaoBank Corp and GemVaxKAEL CoLtd 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 KakaoBank Corp and GemVaxKAEL CoLtd into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between KakaoBank Corp and GemVaxKAEL CoLtd, you can compare the effects of market volatilities on KakaoBank Corp and GemVaxKAEL CoLtd 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 KakaoBank Corp with a short position of GemVaxKAEL CoLtd. Check out your portfolio center. Please also check ongoing floating volatility patterns of KakaoBank Corp and GemVaxKAEL CoLtd.

Diversification Opportunities for KakaoBank Corp and GemVaxKAEL CoLtd

0.14
  Correlation Coefficient

Average diversification

The 3 months correlation between KakaoBank and GemVaxKAEL is 0.14. Overlapping area represents the amount of risk that can be diversified away by holding KakaoBank Corp and GemVaxKAEL CoLtd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GemVaxKAEL CoLtd and KakaoBank Corp 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 KakaoBank Corp are associated (or correlated) with GemVaxKAEL CoLtd. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GemVaxKAEL CoLtd has no effect on the direction of KakaoBank Corp i.e., KakaoBank Corp and GemVaxKAEL CoLtd go up and down completely randomly.

Pair Corralation between KakaoBank Corp and GemVaxKAEL CoLtd

Assuming the 90 days trading horizon KakaoBank Corp is expected to under-perform the GemVaxKAEL CoLtd. But the stock apears to be less risky and, when comparing its historical volatility, KakaoBank Corp is 2.43 times less risky than GemVaxKAEL CoLtd. The stock trades about -0.01 of its potential returns per unit of risk. The GemVaxKAEL CoLtd is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  1,329,000  in GemVaxKAEL CoLtd on October 25, 2024 and sell it today you would earn a total of  477,000  from holding GemVaxKAEL CoLtd or generate 35.89% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthInsignificant
Accuracy98.39%
ValuesDaily Returns

KakaoBank Corp  vs.  GemVaxKAEL CoLtd

 Performance 
       Timeline  
KakaoBank Corp 

Risk-Adjusted Performance

0 of 100

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

Risk-Adjusted Performance

9 of 100

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

KakaoBank Corp and GemVaxKAEL CoLtd Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with KakaoBank Corp and GemVaxKAEL CoLtd

The main advantage of trading using opposite KakaoBank Corp and GemVaxKAEL CoLtd positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if KakaoBank Corp position performs unexpectedly, GemVaxKAEL CoLtd 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 GemVaxKAEL CoLtd will offset losses from the drop in GemVaxKAEL CoLtd's long position.
The idea behind KakaoBank Corp and GemVaxKAEL CoLtd 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 File Import module to quickly import all of your third-party portfolios from your local drive in csv format.

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