Correlation Between LS Materials and Korea Ratings

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

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

Diversification Opportunities for LS Materials and Korea Ratings

-0.69

Correlation Coefficient

LS Materials  Korea Ratings

Excellent diversification

The 3 months correlation between 417200 and Korea is -0.69. Overlapping area represents the amount of risk that can be diversified away by holding LS Materials and Korea Ratings Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Korea Ratings and LS Materials 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 LS Materials are associated (or correlated) with Korea Ratings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Korea Ratings has no effect on the direction of LS Materials i.e., LS Materials and Korea Ratings go up and down completely randomly.

Pair Corralation between LS Materials and Korea Ratings

Assuming the 90 days trading horizon LS Materials is expected to under-perform the Korea Ratings. In addition to that, LS Materials is 6.45 times more volatile than Korea Ratings Co. It trades about -0.01 of its total potential returns per unit of risk. Korea Ratings Co is currently generating about 0.18 per unit of volatility. If you would invest  8,520,000  in Korea Ratings Co on October 22, 2024 and sell it today you would earn a total of  620,000  from holding Korea Ratings Co or generate 7.28% return on investment over 90 days.

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

LS Materials  vs.  Korea Ratings Co

LS Materials

Risk-Adjusted Performance

0 of 100

Very Weak

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

Korea Ratings

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Korea Ratings Co are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Korea Ratings may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with LS Materials and Korea Ratings

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

The idea behind LS Materials and Korea Ratings 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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.