Correlation Between Korea Electric and FS KKR

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

Diversification Opportunities for Korea Electric and FS KKR

0.8

Correlation Coefficient

Korea Electric  FS KKR

Very poor diversification

The 3 months correlation between Korea and FSK is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Korea Electric Power and FS KKR Capital in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FS KKR Capital 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 FS KKR. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of FS KKR Capital has no effect on the direction of Korea Electric i.e., Korea Electric and FS KKR go up and down completely randomly.

Pair Corralation between Korea Electric and FS KKR

Considering the 90-day investment horizon Korea Electric Power is expected to generate 3.74 times more return on investment than FS KKR. However, Korea Electric is 3.74 times more volatile than FS KKR Capital. It trades about 0.15 of its potential returns per unit of risk. FS KKR Capital is currently generating about 0.13 per unit of risk. If you would invest  942.00  in Korea Electric Power on May 5, 2025 and sell it today you would earn a total of  371.00  from holding Korea Electric Power or generate 39.38% return on investment over 90 days.

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

Korea Electric Power  vs.  FS KKR Capital

Korea Electric Power

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Korea Electric Power are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Even with relatively unfluctuating technical and fundamental indicators, Korea Electric reported solid returns over the last few months and may actually be approaching a breakup point.

FS KKR Capital

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in FS KKR Capital are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite quite unsteady basic indicators, FS KKR may actually be approaching a critical reversion point that can send shares even higher in September 2025.

Pair Trading with Korea Electric and FS KKR

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

The idea behind Korea Electric Power and FS KKR Capital 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.