Correlation Between Korea Electric and Cadiz
Can any of the company-specific risk be diversified away by investing in both Korea Electric and Cadiz 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 Cadiz 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 Cadiz Inc, you can compare the effects of market volatilities on Korea Electric and Cadiz 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 Cadiz. Check out your portfolio center. Please also check ongoing floating volatility patterns of Korea Electric and Cadiz.
Diversification Opportunities for Korea Electric and Cadiz
0.41 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Korea and Cadiz is 0.41. Overlapping area represents the amount of risk that can be diversified away by holding Korea Electric Power and Cadiz Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cadiz Inc 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 Cadiz. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cadiz Inc has no effect on the direction of Korea Electric i.e., Korea Electric and Cadiz go up and down completely randomly.
Pair Corralation between Korea Electric and Cadiz
Considering the 90-day investment horizon Korea Electric Power is expected to under-perform the Cadiz. But the stock apears to be less risky and, when comparing its historical volatility, Korea Electric Power is 2.24 times less risky than Cadiz. The stock trades about 0.0 of its potential returns per unit of risk. The Cadiz Inc is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest 204.00 in Cadiz Inc on January 25, 2024 and sell it today you would earn a total of 20.00 from holding Cadiz Inc or generate 9.8% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Korea Electric Power vs. Cadiz Inc
Performance |
| Timeline |
| Korea Electric Power |
| Cadiz Inc |
Korea Electric and Cadiz Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Korea Electric and Cadiz
The main advantage of trading using opposite Korea Electric and Cadiz positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Korea Electric position performs unexpectedly, Cadiz 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 Cadiz will offset losses from the drop in Cadiz's long position.| Korea Electric vs. Enel Chile SA | Korea Electric vs. Centrais Eltricas Brasileiras | Korea Electric vs. Central Puerto SA | Korea Electric vs. CMS Energy |
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 Transaction History module to view history of all your transactions and understand their impact on performance.
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