Correlation Between Kosdaq Composite and Mgame Corp

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

Diversification Opportunities for Kosdaq Composite and Mgame Corp

0.46

Correlation Coefficient

Kosdaq Composite  Mgame Corp

Very weak diversification

The 3 months correlation between Kosdaq and Mgame is 0.46. Overlapping area represents the amount of risk that can be diversified away by holding Kosdaq Composite Index and Mgame Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mgame 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 Mgame Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mgame Corp has no effect on the direction of Kosdaq Composite i.e., Kosdaq Composite and Mgame Corp go up and down completely randomly.

Pair Corralation between Kosdaq Composite and Mgame Corp

Assuming the 90 days trading horizon Kosdaq Composite Index is expected to under-perform the Mgame Corp. But the index apears to be less risky and, when comparing its historical volatility, Kosdaq Composite Index is 2.46 times less risky than Mgame Corp. The index trades about -0.13 of its potential returns per unit of risk. The Mgame Corp is currently generating about -0.03 of returns per unit of risk over similar time horizon. If you would invest  598,000  in Mgame Corp on September 1, 2024 and sell it today you would lose (57,000) from holding Mgame Corp or give up 9.53% of portfolio value over 90 days.

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

Kosdaq Composite Index  vs.  Mgame Corp

Pair Trading with Kosdaq Composite and Mgame Corp

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

The idea behind Kosdaq Composite Index and Mgame 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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.