Correlation Between Kosdaq Composite and Insun Environment

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

Diversification Opportunities for Kosdaq Composite and Insun Environment

0.93

Correlation Coefficient

Kosdaq Composite  Insun Environment

Almost no diversification

The 3 months correlation between Kosdaq and Insun is 0.93. Overlapping area represents the amount of risk that can be diversified away by holding Kosdaq Composite Index and Insun Environment New in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Insun Environment New 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 Insun Environment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Insun Environment New has no effect on the direction of Kosdaq Composite i.e., Kosdaq Composite and Insun Environment go up and down completely randomly.

Pair Corralation between Kosdaq Composite and Insun Environment

Assuming the 90 days trading horizon Kosdaq Composite is expected to generate 15.13 times less return on investment than Insun Environment. But when comparing it to its historical volatility, Kosdaq Composite Index is 1.75 times less risky than Insun Environment. It trades about 0.01 of its potential returns per unit of risk. Insun Environment New is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  498,000  in Insun Environment New on September 21, 2024 and sell it today you would earn a total of  47,000  from holding Insun Environment New or generate 9.44% return on investment over 90 days.

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

Kosdaq Composite Index  vs.  Insun Environment New

Pair Trading with Kosdaq Composite and Insun Environment

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

The idea behind Kosdaq Composite Index and Insun Environment New 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.