Correlation Between Bohae Brewery and Hwaseung Industries
Can any of the company-specific risk be diversified away by investing in both Bohae Brewery and Hwaseung Industries 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 Bohae Brewery and Hwaseung Industries into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Bohae Brewery and Hwaseung Industries Co, you can compare the effects of market volatilities on Bohae Brewery and Hwaseung Industries 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 Bohae Brewery with a short position of Hwaseung Industries. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bohae Brewery and Hwaseung Industries.
Diversification Opportunities for Bohae Brewery and Hwaseung Industries
-0.21 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Bohae and Hwaseung is -0.21. Overlapping area represents the amount of risk that can be diversified away by holding Bohae Brewery and Hwaseung Industries Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hwaseung Industries and Bohae Brewery 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 Bohae Brewery are associated (or correlated) with Hwaseung Industries. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hwaseung Industries has no effect on the direction of Bohae Brewery i.e., Bohae Brewery and Hwaseung Industries go up and down completely randomly.
Pair Corralation between Bohae Brewery and Hwaseung Industries
Assuming the 90 days trading horizon Bohae Brewery is expected to generate 4.36 times more return on investment than Hwaseung Industries. However, Bohae Brewery is 4.36 times more volatile than Hwaseung Industries Co. It trades about 0.07 of its potential returns per unit of risk. Hwaseung Industries Co is currently generating about 0.05 per unit of risk. If you would invest 42,500 in Bohae Brewery on August 30, 2024 and sell it today you would earn a total of 3,100 from holding Bohae Brewery or generate 7.29% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Bohae Brewery vs. Hwaseung Industries Co
Performance |
| Timeline |
| Bohae Brewery |
| Hwaseung Industries |
Bohae Brewery and Hwaseung Industries Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Bohae Brewery and Hwaseung Industries
The main advantage of trading using opposite Bohae Brewery and Hwaseung Industries positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bohae Brewery position performs unexpectedly, Hwaseung Industries 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 Hwaseung Industries will offset losses from the drop in Hwaseung Industries' long position.| Bohae Brewery vs. Samsung Electronics Co | Bohae Brewery vs. Samsung Electronics Co | Bohae Brewery vs. Hyundai Motor Co | Bohae Brewery vs. Hyundai Motor |
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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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.
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