Correlation Between Kosdaq Composite and Incar Financial

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

Diversification Opportunities for Kosdaq Composite and Incar Financial

-0.62

Correlation Coefficient

Kosdaq Composite  Incar Financial

Excellent diversification

The 3 months correlation between Kosdaq and Incar is -0.62. Overlapping area represents the amount of risk that can be diversified away by holding Kosdaq Composite Index and Incar Financial Service in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Incar Financial Service 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 Incar Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Incar Financial Service has no effect on the direction of Kosdaq Composite i.e., Kosdaq Composite and Incar Financial go up and down completely randomly.

Pair Corralation between Kosdaq Composite and Incar Financial

Assuming the 90 days trading horizon Kosdaq Composite Index is expected to under-perform the Incar Financial. But the index apears to be less risky and, when comparing its historical volatility, Kosdaq Composite Index is 2.16 times less risky than Incar Financial. The index trades about -0.05 of its potential returns per unit of risk. The Incar Financial Service is currently generating about 0.23 of returns per unit of risk over similar time horizon. If you would invest  430,000  in Incar Financial Service on September 5, 2024 and sell it today you would earn a total of  208,000  from holding Incar Financial Service or generate 48.37% return on investment over 90 days.

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

Kosdaq Composite Index  vs.  Incar Financial Service

Pair Trading with Kosdaq Composite and Incar Financial

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

The idea behind Kosdaq Composite Index and Incar Financial Service 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.