Correlation Between Kosdaq Composite and MiraeAsset TIGER

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

Diversification Opportunities for Kosdaq Composite and MiraeAsset TIGER

-0.46

Correlation Coefficient

Kosdaq Composite  MiraeAsset TIGER

Very good diversification

The 3 months correlation between Kosdaq and MiraeAsset is -0.46. Overlapping area represents the amount of risk that can be diversified away by holding Kosdaq Composite Index and MiraeAsset TIGER China in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MiraeAsset TIGER China 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 MiraeAsset TIGER. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MiraeAsset TIGER China has no effect on the direction of Kosdaq Composite i.e., Kosdaq Composite and MiraeAsset TIGER go up and down completely randomly.

Pair Corralation between Kosdaq Composite and MiraeAsset TIGER

Assuming the 90 days trading horizon Kosdaq Composite Index is expected to under-perform the MiraeAsset TIGER. In addition to that, Kosdaq Composite is 1.18 times more volatile than MiraeAsset TIGER China. It trades about -0.1 of its total potential returns per unit of risk. MiraeAsset TIGER China is currently generating about 0.04 per unit of volatility. If you would invest  930,000  in MiraeAsset TIGER China on September 27, 2024 and sell it today you would earn a total of  17,500  from holding MiraeAsset TIGER China or generate 1.88% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Kosdaq Composite Index  vs.  MiraeAsset TIGER China

Pair Trading with Kosdaq Composite and MiraeAsset TIGER

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

The idea behind Kosdaq Composite Index and MiraeAsset TIGER China 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.