Correlation Between Kosdaq Composite and Silla Sg

Can any of the company-specific risk be diversified away by investing in both Kosdaq Composite and Silla Sg 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 Silla Sg 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 Silla Sg Co, you can compare the effects of market volatilities on Kosdaq Composite and Silla Sg 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 Silla Sg. Check out your portfolio center. Please also check ongoing floating volatility patterns of Kosdaq Composite and Silla Sg.

Diversification Opportunities for Kosdaq Composite and Silla Sg

0.77

Correlation Coefficient

Kosdaq Composite  Silla Sg

Poor diversification

The 3 months correlation between Kosdaq and Silla is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding Kosdaq Composite Index and Silla Sg Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Silla Sg 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 Silla Sg. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Silla Sg has no effect on the direction of Kosdaq Composite i.e., Kosdaq Composite and Silla Sg go up and down completely randomly.

Pair Corralation between Kosdaq Composite and Silla Sg

Assuming the 90 days trading horizon Kosdaq Composite Index is expected to under-perform the Silla Sg. But the index apears to be less risky and, when comparing its historical volatility, Kosdaq Composite Index is 1.47 times less risky than Silla Sg. The index trades about -0.05 of its potential returns per unit of risk. The Silla Sg Co is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  612,000  in Silla Sg Co on September 5, 2024 and sell it today you would earn a total of  68,000  from holding Silla Sg Co or generate 11.11% return on investment over 90 days.

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

Kosdaq Composite Index  vs.  Silla Sg Co

Pair Trading with Kosdaq Composite and Silla Sg

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

The idea behind Kosdaq Composite Index and Silla Sg 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.