Correlation Between Korea Investment and National Plastic

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

By analyzing existing cross correlation between Korea Investment Holdings and National Plastic Co, you can compare the effects of market volatilities on Korea Investment and National Plastic 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 Investment with a short position of National Plastic. Check out your portfolio center. Please also check ongoing floating volatility patterns of Korea Investment and National Plastic.

Diversification Opportunities for Korea Investment and National Plastic

-0.15

Correlation Coefficient

Korea Investment  National Plastic

Good diversification

The 3 months correlation between Korea and National is -0.15. Overlapping area represents the amount of risk that can be diversified away by holding Korea Investment Holdings and National Plastic Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on National Plastic and Korea Investment 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 Investment Holdings are associated (or correlated) with National Plastic. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of National Plastic has no effect on the direction of Korea Investment i.e., Korea Investment and National Plastic go up and down completely randomly.

Pair Corralation between Korea Investment and National Plastic

Assuming the 90 days trading horizon Korea Investment Holdings is expected to under-perform the National Plastic. In addition to that, Korea Investment is 1.64 times more volatile than National Plastic Co. It trades about -0.06 of its total potential returns per unit of risk. National Plastic Co is currently generating about 0.03 per unit of volatility. If you would invest  258,500  in National Plastic Co on September 23, 2024 and sell it today you would earn a total of  1,500  from holding National Plastic Co or generate 0.58% return on investment over 90 days.

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

Korea Investment Holdings  vs.  National Plastic Co

Korea Investment Holdings

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Korea Investment Holdings are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Korea Investment is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

National Plastic

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in National Plastic Co are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, National Plastic is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Korea Investment and National Plastic

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

The idea behind Korea Investment Holdings and National Plastic 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.

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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.