Correlation Between Kosdaq Composite and Celltrion Pharm

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

Diversification Opportunities for Kosdaq Composite and Celltrion Pharm

0.89

Correlation Coefficient

Kosdaq Composite  Celltrion Pharm

Very poor diversification

The 3 months correlation between Kosdaq and Celltrion is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding Kosdaq Composite Index and Celltrion Pharm in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Celltrion Pharm 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 Celltrion Pharm. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Celltrion Pharm has no effect on the direction of Kosdaq Composite i.e., Kosdaq Composite and Celltrion Pharm go up and down completely randomly.

Pair Corralation between Kosdaq Composite and Celltrion Pharm

Assuming the 90 days trading horizon Kosdaq Composite Index is expected to under-perform the Celltrion Pharm. But the index apears to be less risky and, when comparing its historical volatility, Kosdaq Composite Index is 1.81 times less risky than Celltrion Pharm. The index trades about -0.12 of its potential returns per unit of risk. The Celltrion Pharm is currently generating about -0.05 of returns per unit of risk over similar time horizon. If you would invest  7,080,000  in Celltrion Pharm on September 26, 2024 and sell it today you would lose (840,000) from holding Celltrion Pharm or give up 11.86% of portfolio value over 90 days.

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

Kosdaq Composite Index  vs.  Celltrion Pharm

Pair Trading with Kosdaq Composite and Celltrion Pharm

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

The idea behind Kosdaq Composite Index and Celltrion Pharm 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 File Import module to quickly import all of your third-party portfolios from your local drive in csv format.