Correlation Between Kosdaq Composite and HANA Micron

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

Diversification Opportunities for Kosdaq Composite and HANA Micron

0.83

Correlation Coefficient

Kosdaq Composite  HANA Micron

Very poor diversification

The 3 months correlation between Kosdaq and HANA is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding Kosdaq Composite Index and HANA Micron in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on HANA Micron 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 HANA Micron. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of HANA Micron has no effect on the direction of Kosdaq Composite i.e., Kosdaq Composite and HANA Micron go up and down completely randomly.

Pair Corralation between Kosdaq Composite and HANA Micron

Assuming the 90 days trading horizon Kosdaq Composite is expected to generate 1.51 times less return on investment than HANA Micron. But when comparing it to its historical volatility, Kosdaq Composite Index is 5.06 times less risky than HANA Micron. It trades about 0.31 of its potential returns per unit of risk. HANA Micron is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  996,000  in HANA Micron on October 22, 2024 and sell it today you would earn a total of  70,000  from holding HANA Micron or generate 7.03% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	94.74%
Values	Daily Returns

Kosdaq Composite Index  vs.  HANA Micron

Pair Trading with Kosdaq Composite and HANA Micron

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

The idea behind Kosdaq Composite Index and HANA Micron 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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.