Correlation Between CKH Food and Korea Line

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

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

Diversification Opportunities for CKH Food and Korea Line

0.12

Correlation Coefficient

CKH Food  Korea Line

Average diversification

The 3 months correlation between CKH and Korea is 0.12. Overlapping area represents the amount of risk that can be diversified away by holding CKH Food Health and Korea Line in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Korea Line and CKH Food 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 CKH Food Health are associated (or correlated) with Korea Line. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Korea Line has no effect on the direction of CKH Food i.e., CKH Food and Korea Line go up and down completely randomly.

Pair Corralation between CKH Food and Korea Line

Assuming the 90 days trading horizon CKH Food Health is expected to under-perform the Korea Line. In addition to that, CKH Food is 1.14 times more volatile than Korea Line. It trades about -0.19 of its total potential returns per unit of risk. Korea Line is currently generating about -0.01 per unit of volatility. If you would invest  167,400  in Korea Line on December 30, 2024 and sell it today you would lose (2,300) from holding Korea Line or give up 1.37% of portfolio value over 90 days.

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

CKH Food Health  vs.  Korea Line

CKH Food Health

Risk-Adjusted Performance

Very Weak

Over the last 90 days CKH Food Health has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Korea Line

Risk-Adjusted Performance

Very Weak

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

Pair Trading with CKH Food and Korea Line

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

The idea behind CKH Food Health and Korea Line 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.