Correlation Between Korea Electric and Cronos

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

Diversification Opportunities for Korea Electric and Cronos

-0.57

Correlation Coefficient

Korea Electric  Cronos

Excellent diversification

The 3 months correlation between Korea and Cronos is -0.57. Overlapping area represents the amount of risk that can be diversified away by holding Korea Electric Power and Cronos Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cronos Group 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 Cronos. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cronos Group has no effect on the direction of Korea Electric i.e., Korea Electric and Cronos go up and down completely randomly.

Pair Corralation between Korea Electric and Cronos

Considering the 90-day investment horizon Korea Electric is expected to generate 9.02 times less return on investment than Cronos. But when comparing it to its historical volatility, Korea Electric Power is 1.72 times less risky than Cronos. It trades about 0.01 of its potential returns per unit of risk. Cronos Group is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  171.00  in Cronos Group on March 15, 2024 and sell it today you would earn a total of  79.00  from holding Cronos Group or generate 46.2% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Korea Electric Power  vs.  Cronos Group

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 uncertain performance in the last few months, the Stock's technical and fundamental indicators remain relatively invariable which may send shares a bit higher in July 2024. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

Cronos Group

Risk-Adjusted Performance

6 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Cronos Group are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of very weak basic indicators, Cronos displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Korea Electric and Cronos

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

The idea behind Korea Electric Power and Cronos Group 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 Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.