Correlation Between Central Puerto and Korea Electric

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

By analyzing existing cross correlation between Central Puerto SA and Korea Electric Power, you can compare the effects of market volatilities on Central Puerto and Korea Electric 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 Central Puerto with a short position of Korea Electric. Check out your portfolio center. Please also check ongoing floating volatility patterns of Central Puerto and Korea Electric.

Diversification Opportunities for Central Puerto and Korea Electric

0.55

Correlation Coefficient

Central Puerto  Korea Electric

Very weak diversification

The 3 months correlation between Central and Korea is 0.55. Overlapping area represents the amount of risk that can be diversified away by holding Central Puerto SA and Korea Electric Power in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Korea Electric Power and Central Puerto 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 Central Puerto SA are associated (or correlated) with Korea Electric. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Korea Electric Power has no effect on the direction of Central Puerto i.e., Central Puerto and Korea Electric go up and down completely randomly.

Pair Corralation between Central Puerto and Korea Electric

Given the investment horizon of 90 days Central Puerto SA is expected to generate 1.02 times more return on investment than Korea Electric. However, Central Puerto is 1.02 times more volatile than Korea Electric Power. It trades about 0.31 of its potential returns per unit of risk. Korea Electric Power is currently generating about 0.08 per unit of risk. If you would invest  891.00  in Central Puerto SA on September 2, 2024 and sell it today you would earn a total of  472.00  from holding Central Puerto SA or generate 52.97% return on investment over 90 days.

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

Central Puerto SA  vs.  Korea Electric Power

Central Puerto SA

Risk-Adjusted Performance

24 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Central Puerto SA are ranked lower than 24 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak basic indicators, Central Puerto unveiled solid returns over the last few months and may actually be approaching a breakup point.

Korea Electric Power

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Korea Electric Power are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak technical and fundamental indicators, Korea Electric may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Central Puerto and Korea Electric

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

The idea behind Central Puerto SA and Korea Electric Power 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.

Check out your portfolio center.

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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.