Correlation Between ITM Semiconductor and Korea Information

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

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

Diversification Opportunities for ITM Semiconductor and Korea Information

0.38

Correlation Coefficient

ITM Semiconductor  Korea Information

Weak diversification

The 3 months correlation between ITM and Korea is 0.38. Overlapping area represents the amount of risk that can be diversified away by holding ITM Semiconductor Co and Korea Information Engineering in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Korea Information and ITM Semiconductor 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 ITM Semiconductor Co are associated (or correlated) with Korea Information. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Korea Information has no effect on the direction of ITM Semiconductor i.e., ITM Semiconductor and Korea Information go up and down completely randomly.

Pair Corralation between ITM Semiconductor and Korea Information

Assuming the 90 days trading horizon ITM Semiconductor Co is expected to under-perform the Korea Information. In addition to that, ITM Semiconductor is 1.02 times more volatile than Korea Information Engineering. It trades about -0.33 of its total potential returns per unit of risk. Korea Information Engineering is currently generating about 0.0 per unit of volatility. If you would invest  256,000  in Korea Information Engineering on September 23, 2024 and sell it today you would lose (5,000) from holding Korea Information Engineering or give up 1.95% of portfolio value over 90 days.

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

ITM Semiconductor Co  vs.  Korea Information Engineering

ITM Semiconductor

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days ITM Semiconductor 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.

Korea Information

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with ITM Semiconductor and Korea Information

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

The idea behind ITM Semiconductor Co and Korea Information 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.