Correlation Between Kosdaq Composite and KCC Engineering

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

By analyzing existing cross correlation between Kosdaq Composite Index and KCC Engineering Construction, you can compare the effects of market volatilities on Kosdaq Composite and KCC Engineering 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 Kosdaq Composite with a short position of KCC Engineering. Check out your portfolio center. Please also check ongoing floating volatility patterns of Kosdaq Composite and KCC Engineering.

Diversification Opportunities for Kosdaq Composite and KCC Engineering

0.86

Correlation Coefficient

Kosdaq Composite  KCC Engineering

Very poor diversification

The 3 months correlation between Kosdaq and KCC is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding Kosdaq Composite Index and KCC Engineering Construction in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on KCC Engineering Cons and Kosdaq Composite 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 Kosdaq Composite Index are associated (or correlated) with KCC Engineering. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of KCC Engineering Cons has no effect on the direction of Kosdaq Composite i.e., Kosdaq Composite and KCC Engineering go up and down completely randomly.

Pair Corralation between Kosdaq Composite and KCC Engineering

Assuming the 90 days trading horizon Kosdaq Composite is expected to generate 3.79 times less return on investment than KCC Engineering. In addition to that, Kosdaq Composite is 1.49 times more volatile than KCC Engineering Construction. It trades about 0.03 of its total potential returns per unit of risk. KCC Engineering Construction is currently generating about 0.14 per unit of volatility. If you would invest  392,500  in KCC Engineering Construction on September 19, 2024 and sell it today you would earn a total of  17,000  from holding KCC Engineering Construction or generate 4.33% return on investment over 90 days.

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

Kosdaq Composite Index  vs.  KCC Engineering Construction

Pair Trading with Kosdaq Composite and KCC Engineering

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

The idea behind Kosdaq Composite Index and KCC Engineering Construction 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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..