Correlation Between KODEX SP500TR and KODEX KOSPI

Can any of the company-specific risk be diversified away by investing in both KODEX SP500TR and KODEX KOSPI 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 KODEX SP500TR and KODEX KOSPI into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between KODEX SP500TR and KODEX KOSPI LargeCap, you can compare the effects of market volatilities on KODEX SP500TR and KODEX KOSPI 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 KODEX SP500TR with a short position of KODEX KOSPI. Check out your portfolio center. Please also check ongoing floating volatility patterns of KODEX SP500TR and KODEX KOSPI.

Diversification Opportunities for KODEX SP500TR and KODEX KOSPI

-0.79

Correlation Coefficient

KODEX SP500TR  KODEX KOSPI

Pay attention - limited upside

The 3 months correlation between KODEX and KODEX is -0.79. Overlapping area represents the amount of risk that can be diversified away by holding KODEX SP500TR and KODEX KOSPI LargeCap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on KODEX KOSPI LargeCap and KODEX SP500TR 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 KODEX SP500TR are associated (or correlated) with KODEX KOSPI. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of KODEX KOSPI LargeCap has no effect on the direction of KODEX SP500TR i.e., KODEX SP500TR and KODEX KOSPI go up and down completely randomly.

Pair Corralation between KODEX SP500TR and KODEX KOSPI

Assuming the 90 days trading horizon KODEX SP500TR is expected to generate 0.7 times more return on investment than KODEX KOSPI. However, KODEX SP500TR is 1.42 times less risky than KODEX KOSPI. It trades about 0.16 of its potential returns per unit of risk. KODEX KOSPI LargeCap is currently generating about 0.02 per unit of risk. If you would invest  1,101,500  in KODEX SP500TR on October 12, 2024 and sell it today you would earn a total of  870,500  from holding KODEX SP500TR or generate 79.03% return on investment over 90 days.

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

KODEX SP500TR  vs.  KODEX KOSPI LargeCap

KODEX SP500TR

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in KODEX SP500TR are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, KODEX SP500TR may actually be approaching a critical reversion point that can send shares even higher in February 2025.

KODEX KOSPI LargeCap

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with KODEX SP500TR and KODEX KOSPI

The main advantage of trading using opposite KODEX SP500TR and KODEX KOSPI positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if KODEX SP500TR position performs unexpectedly, KODEX KOSPI 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 KODEX KOSPI will offset losses from the drop in KODEX KOSPI's long position.

The idea behind KODEX SP500TR and KODEX KOSPI LargeCap 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.