Correlation Between Mobileleader CoLtd and Kosdaq Composite

Can any of the company-specific risk be diversified away by investing in both Mobileleader CoLtd and Kosdaq Composite 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 Mobileleader CoLtd and Kosdaq Composite into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Mobileleader CoLtd and Kosdaq Composite Index, you can compare the effects of market volatilities on Mobileleader CoLtd and Kosdaq Composite 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 Mobileleader CoLtd with a short position of Kosdaq Composite. Check out your portfolio center. Please also check ongoing floating volatility patterns of Mobileleader CoLtd and Kosdaq Composite.

Diversification Opportunities for Mobileleader CoLtd and Kosdaq Composite

0.69

Correlation Coefficient

Mobileleader CoLtd  Kosdaq Composite

Poor diversification

The 3 months correlation between Mobileleader and Kosdaq is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding Mobileleader CoLtd and Kosdaq Composite Index in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kosdaq Composite Index and Mobileleader CoLtd 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 Mobileleader CoLtd are associated (or correlated) with Kosdaq Composite. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kosdaq Composite Index has no effect on the direction of Mobileleader CoLtd i.e., Mobileleader CoLtd and Kosdaq Composite go up and down completely randomly.

Pair Corralation between Mobileleader CoLtd and Kosdaq Composite

Assuming the 90 days trading horizon Mobileleader CoLtd is expected to under-perform the Kosdaq Composite. In addition to that, Mobileleader CoLtd is 1.8 times more volatile than Kosdaq Composite Index. It trades about -0.07 of its total potential returns per unit of risk. Kosdaq Composite Index is currently generating about -0.11 per unit of volatility. If you would invest  76,766  in Kosdaq Composite Index on August 30, 2024 and sell it today you would lose (7,333) from holding Kosdaq Composite Index or give up 9.55% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.31%
Values	Daily Returns

Mobileleader CoLtd  vs.  Kosdaq Composite Index

Pair Trading with Mobileleader CoLtd and Kosdaq Composite

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

The idea behind Mobileleader CoLtd and Kosdaq Composite Index 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.