Correlation Between Kosdaq Composite and KODEX 200LONGKOSDAQ150

Can any of the company-specific risk be diversified away by investing in both Kosdaq Composite and KODEX 200LONGKOSDAQ150 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 KODEX 200LONGKOSDAQ150 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 KODEX 200LONGKOSDAQ150SHORT Futures, you can compare the effects of market volatilities on Kosdaq Composite and KODEX 200LONGKOSDAQ150 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 KODEX 200LONGKOSDAQ150. Check out your portfolio center. Please also check ongoing floating volatility patterns of Kosdaq Composite and KODEX 200LONGKOSDAQ150.

Diversification Opportunities for Kosdaq Composite and KODEX 200LONGKOSDAQ150

-0.76

Correlation Coefficient

Kosdaq Composite  KODEX 200LONGKOSDAQ150

Pay attention - limited upside

The 3 months correlation between Kosdaq and KODEX is -0.76. Overlapping area represents the amount of risk that can be diversified away by holding Kosdaq Composite Index and KODEX 200LONGKOSDAQ150SHORT Fu in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on KODEX 200LONGKOSDAQ150 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 KODEX 200LONGKOSDAQ150. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of KODEX 200LONGKOSDAQ150 has no effect on the direction of Kosdaq Composite i.e., Kosdaq Composite and KODEX 200LONGKOSDAQ150 go up and down completely randomly.

Pair Corralation between Kosdaq Composite and KODEX 200LONGKOSDAQ150

Assuming the 90 days trading horizon Kosdaq Composite Index is expected to under-perform the KODEX 200LONGKOSDAQ150. In addition to that, Kosdaq Composite is 1.37 times more volatile than KODEX 200LONGKOSDAQ150SHORT Futures. It trades about -0.12 of its total potential returns per unit of risk. KODEX 200LONGKOSDAQ150SHORT Futures is currently generating about 0.1 per unit of volatility. If you would invest  871,500  in KODEX 200LONGKOSDAQ150SHORT Futures on September 24, 2024 and sell it today you would earn a total of  62,000  from holding KODEX 200LONGKOSDAQ150SHORT Futures or generate 7.11% 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.  KODEX 200LONGKOSDAQ150SHORT Fu

Pair Trading with Kosdaq Composite and KODEX 200LONGKOSDAQ150

The main advantage of trading using opposite Kosdaq Composite and KODEX 200LONGKOSDAQ150 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Kosdaq Composite position performs unexpectedly, KODEX 200LONGKOSDAQ150 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 KODEX 200LONGKOSDAQ150 will offset losses from the drop in KODEX 200LONGKOSDAQ150's long position.

The idea behind Kosdaq Composite Index and KODEX 200LONGKOSDAQ150SHORT Futures 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.

Check out your portfolio center.

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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.