Correlation Between Kosdaq Composite and YeSUN Tech

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

Diversification Opportunities for Kosdaq Composite and YeSUN Tech

-0.28

Correlation Coefficient

Kosdaq Composite  YeSUN Tech

Very good diversification

The 3 months correlation between Kosdaq and YeSUN is -0.28. Overlapping area represents the amount of risk that can be diversified away by holding Kosdaq Composite Index and YeSUN Tech CoLtd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on YeSUN Tech CoLtd 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 YeSUN Tech. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of YeSUN Tech CoLtd has no effect on the direction of Kosdaq Composite i.e., Kosdaq Composite and YeSUN Tech go up and down completely randomly.

Pair Corralation between Kosdaq Composite and YeSUN Tech

Assuming the 90 days trading horizon Kosdaq Composite Index is expected to generate 12.15 times more return on investment than YeSUN Tech. However, Kosdaq Composite is 12.15 times more volatile than YeSUN Tech CoLtd. It trades about 0.04 of its potential returns per unit of risk. YeSUN Tech CoLtd is currently generating about -0.04 per unit of risk. If you would invest  85,625  in Kosdaq Composite Index on February 5, 2024 and sell it today you would earn a total of  934.00  from holding Kosdaq Composite Index or generate 1.09% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	99.8%
Values	Daily Returns

Kosdaq Composite Index  vs.  YeSUN Tech CoLtd

Pair Trading with Kosdaq Composite and YeSUN Tech

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

The idea behind Kosdaq Composite Index and YeSUN Tech CoLtd 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.