Correlation Between Busan Ind and Korea Computer
Can any of the company-specific risk be diversified away by investing in both Busan Ind and Korea Computer 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 Korea Computer into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Busan Ind and Korea Computer, you can compare the effects of market volatilities on Busan Ind and Korea Computer 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 Korea Computer. Check out your portfolio center. Please also check ongoing floating volatility patterns of Busan Ind and Korea Computer.
Diversification Opportunities for Busan Ind and Korea Computer
0.41 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Busan and Korea is 0.41. Overlapping area represents the amount of risk that can be diversified away by holding Busan Ind and Korea Computer in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Korea Computer 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 Korea Computer. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Korea Computer has no effect on the direction of Busan Ind i.e., Busan Ind and Korea Computer go up and down completely randomly.
Pair Corralation between Busan Ind and Korea Computer
Assuming the 90 days trading horizon Busan Ind is expected to generate 1.19 times less return on investment than Korea Computer. In addition to that, Busan Ind is 1.08 times more volatile than Korea Computer. It trades about 0.02 of its total potential returns per unit of risk. Korea Computer is currently generating about 0.03 per unit of volatility. If you would invest 418,105 in Korea Computer on November 27, 2024 and sell it today you would earn a total of 72,895 from holding Korea Computer or generate 17.43% 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. Korea Computer
Performance |
| Timeline |
| Busan Ind |
| Korea Computer |
Busan Ind and Korea Computer Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Busan Ind and Korea Computer
The main advantage of trading using opposite Busan Ind and Korea Computer positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Busan Ind position performs unexpectedly, Korea Computer 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 Korea Computer will offset losses from the drop in Korea Computer's long position.| Busan Ind vs. Ssangyong Information Communication | Busan Ind vs. E Investment Development | Busan Ind vs. Stic Investments | Busan Ind vs. Korea Investment Holdings |
| Korea Computer vs. Miwon Chemicals Co | Korea Computer vs. Lotte Rental Co | Korea Computer vs. SK Chemicals Co | Korea Computer vs. ENERGYMACHINERY KOREA CoLtd |
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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.
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