Correlation Between Kosdaq Composite and ISU Abxis

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

Diversification Opportunities for Kosdaq Composite and ISU Abxis

0.61

Correlation Coefficient

Kosdaq Composite  ISU Abxis

Poor diversification

The 3 months correlation between Kosdaq and ISU is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding Kosdaq Composite Index and ISU Abxis Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ISU Abxis 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 ISU Abxis. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ISU Abxis has no effect on the direction of Kosdaq Composite i.e., Kosdaq Composite and ISU Abxis go up and down completely randomly.

Pair Corralation between Kosdaq Composite and ISU Abxis

Assuming the 90 days trading horizon Kosdaq Composite Index is expected to under-perform the ISU Abxis. But the index apears to be less risky and, when comparing its historical volatility, Kosdaq Composite Index is 2.59 times less risky than ISU Abxis. The index trades about -0.14 of its potential returns per unit of risk. The ISU Abxis Co is currently generating about 0.29 of returns per unit of risk over similar time horizon. If you would invest  494,500  in ISU Abxis Co on December 10, 2024 and sell it today you would earn a total of  89,500  from holding ISU Abxis Co or generate 18.1% 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.  ISU Abxis Co

Pair Trading with Kosdaq Composite and ISU Abxis

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

The idea behind Kosdaq Composite Index and ISU Abxis 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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.