Correlation Between Korea Electric and Public Service

Can any of the company-specific risk be diversified away by investing in both Korea Electric and Public Service 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 Korea Electric and Public Service into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Korea Electric Power and Public Service, you can compare the effects of market volatilities on Korea Electric and Public Service 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 Korea Electric with a short position of Public Service. Check out your portfolio center. Please also check ongoing floating volatility patterns of Korea Electric and Public Service.

Diversification Opportunities for Korea Electric and Public Service

0.66

Correlation Coefficient

Korea Electric  Public Service

Poor diversification

The 3 months correlation between Korea and Public is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding Korea Electric Power and Public Service in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Public Service and Korea Electric 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 Korea Electric Power are associated (or correlated) with Public Service. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Public Service has no effect on the direction of Korea Electric i.e., Korea Electric and Public Service go up and down completely randomly.

Pair Corralation between Korea Electric and Public Service

Considering the 90-day investment horizon Korea Electric Power is expected to under-perform the Public Service. In addition to that, Korea Electric is 3.55 times more volatile than Public Service. It trades about -0.09 of its total potential returns per unit of risk. Public Service is currently generating about 0.18 per unit of volatility. If you would invest  8,200  in Public Service on June 29, 2024 and sell it today you would earn a total of  225.00  from holding Public Service or generate 2.74% return on investment over 90 days.

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

Korea Electric Power  vs.  Public Service

Korea Electric Power

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Korea Electric Power are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Even with relatively unsteady technical and fundamental indicators, Korea Electric reported solid returns over the last few months and may actually be approaching a breakup point.

Public Service

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Public Service are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of very weak basic indicators, Public Service may actually be approaching a critical reversion point that can send shares even higher in October 2024.

Pair Trading with Korea Electric and Public Service

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

The idea behind Korea Electric Power and Public 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.

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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.