Correlation Between Daishin Balance and Korean Reinsurance

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

By analyzing existing cross correlation between Daishin Balance No and Korean Reinsurance Co, you can compare the effects of market volatilities on Daishin Balance and Korean Reinsurance 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 Daishin Balance with a short position of Korean Reinsurance. Check out your portfolio center. Please also check ongoing floating volatility patterns of Daishin Balance and Korean Reinsurance.

Diversification Opportunities for Daishin Balance and Korean Reinsurance

-0.23

Correlation Coefficient

Daishin Balance  Korean Reinsurance

Very good diversification

The 3 months correlation between Daishin and Korean is -0.23. Overlapping area represents the amount of risk that can be diversified away by holding Daishin Balance No and Korean Reinsurance Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Korean Reinsurance and Daishin Balance 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 Daishin Balance No are associated (or correlated) with Korean Reinsurance. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Korean Reinsurance has no effect on the direction of Daishin Balance i.e., Daishin Balance and Korean Reinsurance go up and down completely randomly.

Pair Corralation between Daishin Balance and Korean Reinsurance

Assuming the 90 days trading horizon Daishin Balance No is expected to generate 1.78 times more return on investment than Korean Reinsurance. However, Daishin Balance is 1.78 times more volatile than Korean Reinsurance Co. It trades about 0.15 of its potential returns per unit of risk. Korean Reinsurance Co is currently generating about 0.06 per unit of risk. If you would invest  99,300  in Daishin Balance No on December 30, 2024 and sell it today you would earn a total of  17,200  from holding Daishin Balance No or generate 17.32% return on investment over 90 days.

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

Daishin Balance No  vs.  Korean Reinsurance Co

Daishin Balance No

Risk-Adjusted Performance

Good

Over the last 90 days Daishin Balance No has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat weak basic indicators, Daishin Balance sustained solid returns over the last few months and may actually be approaching a breakup point.

Korean Reinsurance

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Korean Reinsurance Co are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Korean Reinsurance is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Daishin Balance and Korean Reinsurance

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

The idea behind Daishin Balance No and Korean Reinsurance 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.