Correlation Between Kosdaq Composite and Seung Il

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

Diversification Opportunities for Kosdaq Composite and Seung Il

-0.4

Correlation Coefficient

Kosdaq Composite  Seung Il

Very good diversification

The 3 months correlation between Kosdaq and Seung is -0.4. Overlapping area represents the amount of risk that can be diversified away by holding Kosdaq Composite Index and Seung Il in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Seung Il 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 Seung Il. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Seung Il has no effect on the direction of Kosdaq Composite i.e., Kosdaq Composite and Seung Il go up and down completely randomly.

Pair Corralation between Kosdaq Composite and Seung Il

Assuming the 90 days trading horizon Kosdaq Composite Index is expected to under-perform the Seung Il. But the index apears to be less risky and, when comparing its historical volatility, Kosdaq Composite Index is 1.44 times less risky than Seung Il. The index trades about -0.12 of its potential returns per unit of risk. The Seung Il is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  701,000  in Seung Il on September 26, 2024 and sell it today you would earn a total of  88,000  from holding Seung Il or generate 12.55% return on investment over 90 days.

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

Kosdaq Composite Index  vs.  Seung Il

Pair Trading with Kosdaq Composite and Seung Il

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

The idea behind Kosdaq Composite Index and Seung Il 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 Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.