Correlation Between Korea Electric and Arena Fortify

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

Diversification Opportunities for Korea Electric and Arena Fortify

-0.83

Correlation Coefficient

Korea Electric  Arena Fortify

Pay attention - limited upside

The 3 months correlation between Korea and Arena is -0.83. Overlapping area represents the amount of risk that can be diversified away by holding Korea Electric Power and Arena Fortify Acquisition in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Arena Fortify Acquisition 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 Arena Fortify. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Arena Fortify Acquisition has no effect on the direction of Korea Electric i.e., Korea Electric and Arena Fortify go up and down completely randomly.

Pair Corralation between Korea Electric and Arena Fortify

Considering the 90-day investment horizon Korea Electric Power is expected to under-perform the Arena Fortify. In addition to that, Korea Electric is 12.46 times more volatile than Arena Fortify Acquisition. It trades about -0.01 of its total potential returns per unit of risk. Arena Fortify Acquisition is currently generating about 0.12 per unit of volatility. If you would invest  999.00  in Arena Fortify Acquisition on February 24, 2024 and sell it today you would earn a total of  28.00  from holding Arena Fortify Acquisition or generate 2.8% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Significant
Accuracy	27.62%
Values	Daily Returns

Korea Electric Power  vs.  Arena Fortify Acquisition

Korea Electric Power

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Korea Electric Power has generated negative risk-adjusted returns adding no value to investors with long positions. Even with weak performance in the last few months, the Stock's technical and fundamental indicators remain relatively invariable which may send shares a bit higher in June 2024. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

Arena Fortify Acquisition

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Arena Fortify Acquisition has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, Arena Fortify is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Korea Electric and Arena Fortify

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

The idea behind Korea Electric Power and Arena Fortify Acquisition 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 Portfolio File Import module to quickly import all of your third-party portfolios from your local drive in csv format.