Correlation Between Busan Industrial and Dongnam Chemical
Can any of the company-specific risk be diversified away by investing in both Busan Industrial and Dongnam Chemical 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 Dongnam Chemical 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 Dongnam Chemical Co, you can compare the effects of market volatilities on Busan Industrial and Dongnam Chemical 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 Dongnam Chemical. Check out your portfolio center. Please also check ongoing floating volatility patterns of Busan Industrial and Dongnam Chemical.
Diversification Opportunities for Busan Industrial and Dongnam Chemical
-0.46 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Busan and Dongnam is -0.46. Overlapping area represents the amount of risk that can be diversified away by holding Busan Industrial Co and Dongnam Chemical Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dongnam Chemical 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 Dongnam Chemical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dongnam Chemical has no effect on the direction of Busan Industrial i.e., Busan Industrial and Dongnam Chemical go up and down completely randomly.
Pair Corralation between Busan Industrial and Dongnam Chemical
Assuming the 90 days trading horizon Busan Industrial Co is expected to generate 2.45 times more return on investment than Dongnam Chemical. However, Busan Industrial is 2.45 times more volatile than Dongnam Chemical Co. It trades about 0.02 of its potential returns per unit of risk. Dongnam Chemical Co is currently generating about -0.07 per unit of risk. If you would invest 7,241,013 in Busan Industrial Co on September 25, 2024 and sell it today you would earn a total of 508,987 from holding Busan Industrial Co or generate 7.03% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Busan Industrial Co vs. Dongnam Chemical Co
Performance |
| Timeline |
| Busan Industrial |
| Dongnam Chemical |
Busan Industrial and Dongnam Chemical Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Busan Industrial and Dongnam Chemical
The main advantage of trading using opposite Busan Industrial and Dongnam Chemical positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Busan Industrial position performs unexpectedly, Dongnam Chemical 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 Dongnam Chemical will offset losses from the drop in Dongnam Chemical's long position.| Busan Industrial vs. AptaBio Therapeutics | Busan Industrial vs. Wonbang Tech Co | Busan Industrial vs. Busan Ind | Busan Industrial vs. Mirae Asset Daewoo |
| Dongnam Chemical vs. AptaBio Therapeutics | Dongnam Chemical vs. Wonbang Tech Co | Dongnam Chemical vs. Busan Industrial Co | Dongnam Chemical 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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.
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