Correlation Between Busan Ind and Kumho Industrial
Can any of the company-specific risk be diversified away by investing in both Busan Ind and Kumho Industrial 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 Busan Ind and Kumho Industrial into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Busan Ind and Kumho Industrial Co, you can compare the effects of market volatilities on Busan Ind and Kumho Industrial 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 Busan Ind with a short position of Kumho Industrial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Busan Ind and Kumho Industrial.
Diversification Opportunities for Busan Ind and Kumho Industrial
-0.66 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Busan and Kumho is -0.66. Overlapping area represents the amount of risk that can be diversified away by holding Busan Ind and Kumho Industrial Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kumho Industrial and Busan Ind 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 Busan Ind are associated (or correlated) with Kumho Industrial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kumho Industrial has no effect on the direction of Busan Ind i.e., Busan Ind and Kumho Industrial go up and down completely randomly.
Pair Corralation between Busan Ind and Kumho Industrial
Assuming the 90 days trading horizon Busan Ind is expected to generate 1.45 times more return on investment than Kumho Industrial. However, Busan Ind is 1.45 times more volatile than Kumho Industrial Co. It trades about -0.02 of its potential returns per unit of risk. Kumho Industrial Co is currently generating about -0.37 per unit of risk. If you would invest 7,960,000 in Busan Ind on October 18, 2024 and sell it today you would lose (70,000) from holding Busan Ind or give up 0.88% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Busan Ind vs. Kumho Industrial Co
Performance |
| Timeline |
| Busan Ind |
| Kumho Industrial |
Busan Ind and Kumho Industrial Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Busan Ind and Kumho Industrial
The main advantage of trading using opposite Busan Ind and Kumho Industrial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Busan Ind position performs unexpectedly, Kumho Industrial 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 Kumho Industrial will offset losses from the drop in Kumho Industrial's long position.| Busan Ind vs. Dong A Steel Technology | Busan Ind vs. Tuksu Engineering ConstructionLtd | Busan Ind vs. Shin Steel Co | Busan Ind vs. Moonbae Steel |
| Kumho Industrial vs. Jinro Distillers Co | Kumho Industrial vs. ECSTELECOM Co | Kumho Industrial vs. SK Telecom Co | Kumho Industrial vs. iNtRON Biotechnology |
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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.
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