Correlation Between Koryo Credit and Daehan Steel

Can any of the company-specific risk be diversified away by investing in both Koryo Credit and Daehan Steel 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 Koryo Credit and Daehan Steel into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Koryo Credit Information and Daehan Steel, you can compare the effects of market volatilities on Koryo Credit and Daehan Steel 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 Koryo Credit with a short position of Daehan Steel. Check out your portfolio center. Please also check ongoing floating volatility patterns of Koryo Credit and Daehan Steel.

Diversification Opportunities for Koryo Credit and Daehan Steel

0.28

Correlation Coefficient

Koryo Credit  Daehan Steel

Modest diversification

The 3 months correlation between Koryo and Daehan is 0.28. Overlapping area represents the amount of risk that can be diversified away by holding Koryo Credit Information and Daehan Steel in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Daehan Steel and Koryo Credit 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 Koryo Credit Information are associated (or correlated) with Daehan Steel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Daehan Steel has no effect on the direction of Koryo Credit i.e., Koryo Credit and Daehan Steel go up and down completely randomly.

Pair Corralation between Koryo Credit and Daehan Steel

Assuming the 90 days trading horizon Koryo Credit is expected to generate 37.97 times less return on investment than Daehan Steel. But when comparing it to its historical volatility, Koryo Credit Information is 1.97 times less risky than Daehan Steel. It trades about 0.01 of its potential returns per unit of risk. Daehan Steel is currently generating about 0.22 of returns per unit of risk over similar time horizon. If you would invest  1,305,000  in Daehan Steel on September 21, 2024 and sell it today you would earn a total of  357,000  from holding Daehan Steel or generate 27.36% return on investment over 90 days.

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

Koryo Credit Information  vs.  Daehan Steel

Koryo Credit Information

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Koryo Credit Information has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Koryo Credit is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Daehan Steel

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Daehan Steel are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Daehan Steel sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Koryo Credit and Daehan Steel

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

The idea behind Koryo Credit Information and Daehan Steel 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.