Correlation Between Busan Ind and Daekyung Machinery
Can any of the company-specific risk be diversified away by investing in both Busan Ind and Daekyung Machinery 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 Daekyung Machinery into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Busan Ind and Daekyung Machinery Engineering, you can compare the effects of market volatilities on Busan Ind and Daekyung Machinery 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 Daekyung Machinery. Check out your portfolio center. Please also check ongoing floating volatility patterns of Busan Ind and Daekyung Machinery.
Diversification Opportunities for Busan Ind and Daekyung Machinery
0.39 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Busan and Daekyung is 0.39. Overlapping area represents the amount of risk that can be diversified away by holding Busan Ind and Daekyung Machinery Engineering in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Daekyung Machinery 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 Daekyung Machinery. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Daekyung Machinery has no effect on the direction of Busan Ind i.e., Busan Ind and Daekyung Machinery go up and down completely randomly.
Pair Corralation between Busan Ind and Daekyung Machinery
Assuming the 90 days trading horizon Busan Ind is expected to under-perform the Daekyung Machinery. But the stock apears to be less risky and, when comparing its historical volatility, Busan Ind is 1.86 times less risky than Daekyung Machinery. The stock trades about -0.03 of its potential returns per unit of risk. The Daekyung Machinery Engineering is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest 37,200 in Daekyung Machinery Engineering on August 24, 2024 and sell it today you would earn a total of 14,700 from holding Daekyung Machinery Engineering or generate 39.52% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Busan Ind vs. Daekyung Machinery Engineering
Performance |
| Timeline |
| Busan Ind |
| Daekyung Machinery |
Busan Ind and Daekyung Machinery Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Busan Ind and Daekyung Machinery
The main advantage of trading using opposite Busan Ind and Daekyung Machinery positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Busan Ind position performs unexpectedly, Daekyung Machinery 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 Daekyung Machinery will offset losses from the drop in Daekyung Machinery's long position.| Busan Ind vs. Daekyung Machinery Engineering | Busan Ind vs. Shinsegae Engineering Construction | Busan Ind vs. RF Materials Co | Busan Ind vs. Top Material Co |
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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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.
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