Correlation Between KT Submarine and EE-HWA Construction

Can any of the company-specific risk be diversified away by investing in both KT Submarine and EE-HWA Construction 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 KT Submarine and EE-HWA Construction into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between KT Submarine Co and EE HWA Construction Co, you can compare the effects of market volatilities on KT Submarine and EE-HWA Construction 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 KT Submarine with a short position of EE-HWA Construction. Check out your portfolio center. Please also check ongoing floating volatility patterns of KT Submarine and EE-HWA Construction.

Diversification Opportunities for KT Submarine and EE-HWA Construction

-0.32

Correlation Coefficient

KT Submarine  EE-HWA Construction

Very good diversification

The 3 months correlation between 060370 and EE-HWA is -0.32. Overlapping area represents the amount of risk that can be diversified away by holding KT Submarine Co and EE HWA Construction Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on EE HWA Construction and KT Submarine 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 KT Submarine Co are associated (or correlated) with EE-HWA Construction. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of EE HWA Construction has no effect on the direction of KT Submarine i.e., KT Submarine and EE-HWA Construction go up and down completely randomly.

Pair Corralation between KT Submarine and EE-HWA Construction

Assuming the 90 days trading horizon KT Submarine Co is expected to under-perform the EE-HWA Construction. But the stock apears to be less risky and, when comparing its historical volatility, KT Submarine Co is 1.65 times less risky than EE-HWA Construction. The stock trades about -0.07 of its potential returns per unit of risk. The EE HWA Construction Co is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  263,000  in EE HWA Construction Co on September 13, 2024 and sell it today you would earn a total of  46,000  from holding EE HWA Construction Co or generate 17.49% return on investment over 90 days.

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

KT Submarine Co  vs.  EE HWA Construction Co

KT Submarine

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days KT Submarine Co has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

EE HWA Construction

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in EE HWA Construction Co are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, EE-HWA Construction sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with KT Submarine and EE-HWA Construction

The main advantage of trading using opposite KT Submarine and EE-HWA Construction positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if KT Submarine position performs unexpectedly, EE-HWA Construction 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 EE-HWA Construction will offset losses from the drop in EE-HWA Construction's long position.

The idea behind KT Submarine Co and EE HWA Construction 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.

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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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.