Correlation Between Kukil Metal and Daekyung Machinery

Can any of the company-specific risk be diversified away by investing in both Kukil Metal and Daekyung Machinery 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 Kukil Metal and Daekyung Machinery into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Kukil Metal Co and Daekyung Machinery Engineering, you can compare the effects of market volatilities on Kukil Metal and Daekyung Machinery 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 Kukil Metal with a short position of Daekyung Machinery. Check out your portfolio center. Please also check ongoing floating volatility patterns of Kukil Metal and Daekyung Machinery.

Diversification Opportunities for Kukil Metal and Daekyung Machinery

-0.41

Correlation Coefficient

Kukil Metal  Daekyung Machinery

Very good diversification

The 3 months correlation between Kukil and Daekyung is -0.41. Overlapping area represents the amount of risk that can be diversified away by holding Kukil Metal Co and Daekyung Machinery Engineering in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Daekyung Machinery and Kukil Metal 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 Kukil Metal Co are associated (or correlated) with Daekyung Machinery. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Daekyung Machinery has no effect on the direction of Kukil Metal i.e., Kukil Metal and Daekyung Machinery go up and down completely randomly.

Pair Corralation between Kukil Metal and Daekyung Machinery

Assuming the 90 days trading horizon Kukil Metal Co is expected to generate 0.69 times more return on investment than Daekyung Machinery. However, Kukil Metal Co is 1.46 times less risky than Daekyung Machinery. It trades about 0.03 of its potential returns per unit of risk. Daekyung Machinery Engineering is currently generating about -0.15 per unit of risk. If you would invest  173,500  in Kukil Metal Co on September 16, 2024 and sell it today you would earn a total of  1,700  from holding Kukil Metal Co or generate 0.98% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	40.91%
Values	Daily Returns

Kukil Metal Co  vs.  Daekyung Machinery Engineering

Kukil Metal

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Kukil Metal Co 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.

Daekyung Machinery

Risk-Adjusted Performance

0 of 100

Good

Over the last 90 days Daekyung Machinery Engineering has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat weak basic indicators, Daekyung Machinery sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Kukil Metal and Daekyung Machinery

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

The idea behind Kukil Metal Co and Daekyung Machinery Engineering 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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.