Correlation Between Korea Investment and Miwon Chemical

Can any of the company-specific risk be diversified away by investing in both Korea Investment and Miwon Chemical 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 Miwon Chemical 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 Miwon Chemical, you can compare the effects of market volatilities on Korea Investment and Miwon Chemical 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 Miwon Chemical. Check out your portfolio center. Please also check ongoing floating volatility patterns of Korea Investment and Miwon Chemical.

Diversification Opportunities for Korea Investment and Miwon Chemical

-0.29

Correlation Coefficient

Korea Investment  Miwon Chemical

Very good diversification

The 3 months correlation between Korea and Miwon is -0.29. Overlapping area represents the amount of risk that can be diversified away by holding Korea Investment Holdings and Miwon Chemical in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Miwon Chemical 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 Miwon Chemical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Miwon Chemical has no effect on the direction of Korea Investment i.e., Korea Investment and Miwon Chemical go up and down completely randomly.

Pair Corralation between Korea Investment and Miwon Chemical

Assuming the 90 days trading horizon Korea Investment Holdings is expected to generate 1.52 times more return on investment than Miwon Chemical. However, Korea Investment is 1.52 times more volatile than Miwon Chemical. It trades about 0.07 of its potential returns per unit of risk. Miwon Chemical is currently generating about -0.06 per unit of risk. If you would invest  5,010,000  in Korea Investment Holdings on September 28, 2024 and sell it today you would earn a total of  300,000  from holding Korea Investment Holdings or generate 5.99% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.36%
Values	Daily Returns

Korea Investment Holdings  vs.  Miwon Chemical

Korea Investment Holdings

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Korea Investment Holdings are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Korea Investment may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Miwon Chemical

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Miwon Chemical has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Miwon Chemical 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 Miwon Chemical

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

The idea behind Korea Investment Holdings and Miwon Chemical 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.