Correlation Between Busan Industrial and National Plastic
Can any of the company-specific risk be diversified away by investing in both Busan Industrial and National Plastic 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 Industrial and National Plastic into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Busan Industrial Co and National Plastic Co, you can compare the effects of market volatilities on Busan Industrial and National Plastic 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 Industrial with a short position of National Plastic. Check out your portfolio center. Please also check ongoing floating volatility patterns of Busan Industrial and National Plastic.
Diversification Opportunities for Busan Industrial and National Plastic
-0.18 | Correlation Coefficient |
Good diversification
The 3 months correlation between Busan and National is -0.18. Overlapping area represents the amount of risk that can be diversified away by holding Busan Industrial Co and National Plastic Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on National Plastic and Busan Industrial 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 Industrial Co are associated (or correlated) with National Plastic. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of National Plastic has no effect on the direction of Busan Industrial i.e., Busan Industrial and National Plastic go up and down completely randomly.
Pair Corralation between Busan Industrial and National Plastic
Assuming the 90 days trading horizon Busan Industrial Co is expected to generate 3.21 times more return on investment than National Plastic. However, Busan Industrial is 3.21 times more volatile than National Plastic Co. It trades about 0.03 of its potential returns per unit of risk. National Plastic Co is currently generating about -0.58 per unit of risk. If you would invest 7,650,000 in Busan Industrial Co on November 6, 2024 and sell it today you would earn a total of 50,000 from holding Busan Industrial Co or generate 0.65% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Busan Industrial Co vs. National Plastic Co
Performance |
| Timeline |
| Busan Industrial |
| National Plastic |
Busan Industrial and National Plastic Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Busan Industrial and National Plastic
The main advantage of trading using opposite Busan Industrial and National Plastic positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Busan Industrial position performs unexpectedly, National Plastic 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 National Plastic will offset losses from the drop in National Plastic's long position.| Busan Industrial vs. TK Chemical | Busan Industrial vs. Kyung In Synthetic Corp | Busan Industrial vs. Daejung Chemicals Metals | Busan Industrial vs. Kg Chemical |
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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 Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.
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