Correlation Between Kosdaq Composite and Ssangyong Materials

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

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

Diversification Opportunities for Kosdaq Composite and Ssangyong Materials

-0.15

Correlation Coefficient

Kosdaq Composite  Ssangyong Materials

Good diversification

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

Pair Corralation between Kosdaq Composite and Ssangyong Materials

Assuming the 90 days trading horizon Kosdaq Composite Index is expected to under-perform the Ssangyong Materials. But the index apears to be less risky and, when comparing its historical volatility, Kosdaq Composite Index is 1.97 times less risky than Ssangyong Materials. The index trades about -0.05 of its potential returns per unit of risk. The Ssangyong Materials Corp is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  206,500  in Ssangyong Materials Corp on September 5, 2024 and sell it today you would earn a total of  27,000  from holding Ssangyong Materials Corp or generate 13.08% return on investment over 90 days.

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

Kosdaq Composite Index  vs.  Ssangyong Materials Corp

Pair Trading with Kosdaq Composite and Ssangyong Materials

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

The idea behind Kosdaq Composite Index and Ssangyong Materials Corp 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 Portfolio Anywhere module to track or share privately all of your investments from the convenience of any device.