Correlation Between Top Material and Korea Investment

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

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

Diversification Opportunities for Top Material and Korea Investment

-0.74

Correlation Coefficient

Top Material  Korea Investment

Pay attention - limited upside

The 3 months correlation between Top and Korea is -0.74. Overlapping area represents the amount of risk that can be diversified away by holding Top Material Co and Korea Investment Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Korea Investment Holdings and Top Material 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 Top Material Co are associated (or correlated) with Korea Investment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Korea Investment Holdings has no effect on the direction of Top Material i.e., Top Material and Korea Investment go up and down completely randomly.

Pair Corralation between Top Material and Korea Investment

Assuming the 90 days trading horizon Top Material Co is expected to under-perform the Korea Investment. In addition to that, Top Material is 2.18 times more volatile than Korea Investment Holdings. It trades about -0.18 of its total potential returns per unit of risk. Korea Investment Holdings is currently generating about 0.12 per unit of volatility. If you would invest  4,905,000  in Korea Investment Holdings on September 12, 2024 and sell it today you would earn a total of  475,000  from holding Korea Investment Holdings or generate 9.68% return on investment over 90 days.

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

Top Material Co  vs.  Korea Investment Holdings

Top Material

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Top Material 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 Investment Holdings

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Korea Investment Holdings are ranked lower than 9 (%) 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.

Pair Trading with Top Material and Korea Investment

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

The idea behind Top Material Co and Korea Investment Holdings 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.