Correlation Between Busan Ind and Union Materials
Can any of the company-specific risk be diversified away by investing in both Busan Ind and Union Materials 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 Union Materials into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Busan Ind and Union Materials Corp, you can compare the effects of market volatilities on Busan Ind and Union Materials 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 Union Materials. Check out your portfolio center. Please also check ongoing floating volatility patterns of Busan Ind and Union Materials.
Diversification Opportunities for Busan Ind and Union Materials
0.57 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Busan and Union is 0.57. Overlapping area represents the amount of risk that can be diversified away by holding Busan Ind and Union Materials Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Union Materials Corp 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 Union Materials. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Union Materials Corp has no effect on the direction of Busan Ind i.e., Busan Ind and Union Materials go up and down completely randomly.
Pair Corralation between Busan Ind and Union Materials
Assuming the 90 days trading horizon Busan Ind is expected to generate 2.22 times more return on investment than Union Materials. However, Busan Ind is 2.22 times more volatile than Union Materials Corp. It trades about 0.05 of its potential returns per unit of risk. Union Materials Corp is currently generating about -0.01 per unit of risk. If you would invest 6,220,000 in Busan Ind on August 30, 2024 and sell it today you would earn a total of 150,000 from holding Busan Ind or generate 2.41% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Busan Ind vs. Union Materials Corp
Performance |
| Timeline |
| Busan Ind |
| Union Materials Corp |
Busan Ind and Union Materials Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Busan Ind and Union Materials
The main advantage of trading using opposite Busan Ind and Union Materials positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Busan Ind position performs unexpectedly, Union Materials 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 Union Materials will offset losses from the drop in Union Materials' long position.| Busan Ind vs. Sangshin Electronics Co | Busan Ind vs. SungMoon Electronics Co | Busan Ind vs. ABCO Electronics Co | Busan Ind vs. Okins Electronics Co |
| Union Materials vs. KMH Hitech Co | Union Materials vs. GemVaxKAEL CoLtd | Union Materials vs. Busan Industrial Co | Union Materials vs. Busan Ind |
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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..
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