Correlation Between Kosdaq Composite and MEDICOX

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

Diversification Opportunities for Kosdaq Composite and MEDICOX

-0.51

Correlation Coefficient

Kosdaq Composite  MEDICOX

Excellent diversification

The 3 months correlation between Kosdaq and MEDICOX is -0.51. Overlapping area represents the amount of risk that can be diversified away by holding Kosdaq Composite Index and MEDICOX Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MEDICOX 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 MEDICOX. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MEDICOX has no effect on the direction of Kosdaq Composite i.e., Kosdaq Composite and MEDICOX go up and down completely randomly.

Pair Corralation between Kosdaq Composite and MEDICOX

Assuming the 90 days trading horizon Kosdaq Composite Index is expected to generate 0.24 times more return on investment than MEDICOX. However, Kosdaq Composite Index is 4.11 times less risky than MEDICOX. It trades about 0.11 of its potential returns per unit of risk. MEDICOX Co is currently generating about 0.01 per unit of risk. If you would invest  67,715  in Kosdaq Composite Index on December 4, 2024 and sell it today you would earn a total of  6,681  from holding Kosdaq Composite Index or generate 9.87% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	98.25%
Values	Daily Returns

Kosdaq Composite Index  vs.  MEDICOX Co

Pair Trading with Kosdaq Composite and MEDICOX

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

The idea behind Kosdaq Composite Index and MEDICOX 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.

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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.