Correlation Between Korea Alcohol and Neungyule Education

Can any of the company-specific risk be diversified away by investing in both Korea Alcohol and Neungyule Education 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 Korea Alcohol and Neungyule Education into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Korea Alcohol Industrial and Neungyule Education, you can compare the effects of market volatilities on Korea Alcohol and Neungyule Education 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 Korea Alcohol with a short position of Neungyule Education. Check out your portfolio center. Please also check ongoing floating volatility patterns of Korea Alcohol and Neungyule Education.

Diversification Opportunities for Korea Alcohol and Neungyule Education

0.56

Correlation Coefficient

Korea Alcohol  Neungyule Education

Very weak diversification

The 3 months correlation between Korea and Neungyule is 0.56. Overlapping area represents the amount of risk that can be diversified away by holding Korea Alcohol Industrial and Neungyule Education in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Neungyule Education and Korea Alcohol 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 Korea Alcohol Industrial are associated (or correlated) with Neungyule Education. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Neungyule Education has no effect on the direction of Korea Alcohol i.e., Korea Alcohol and Neungyule Education go up and down completely randomly.

Pair Corralation between Korea Alcohol and Neungyule Education

Assuming the 90 days trading horizon Korea Alcohol Industrial is expected to under-perform the Neungyule Education. But the stock apears to be less risky and, when comparing its historical volatility, Korea Alcohol Industrial is 2.64 times less risky than Neungyule Education. The stock trades about -0.17 of its potential returns per unit of risk. The Neungyule Education is currently generating about -0.06 of returns per unit of risk over similar time horizon. If you would invest  378,000  in Neungyule Education on September 3, 2024 and sell it today you would lose (38,000) from holding Neungyule Education or give up 10.05% of portfolio value over 90 days.

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

Korea Alcohol Industrial  vs.  Neungyule Education

Korea Alcohol Industrial

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Korea Alcohol Industrial has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Neungyule Education

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Neungyule Education has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Korea Alcohol and Neungyule Education

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

The idea behind Korea Alcohol Industrial and Neungyule Education 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.