Correlation Between Busan Industrial and Naver
Can any of the company-specific risk be diversified away by investing in both Busan Industrial and Naver 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 Naver 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 Naver, you can compare the effects of market volatilities on Busan Industrial and Naver 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 Naver. Check out your portfolio center. Please also check ongoing floating volatility patterns of Busan Industrial and Naver.
Diversification Opportunities for Busan Industrial and Naver
0.55 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Busan and Naver is 0.55. Overlapping area represents the amount of risk that can be diversified away by holding Busan Industrial Co and Naver in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Naver 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 Naver. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Naver has no effect on the direction of Busan Industrial i.e., Busan Industrial and Naver go up and down completely randomly.
Pair Corralation between Busan Industrial and Naver
Assuming the 90 days trading horizon Busan Industrial is expected to generate 1.3 times less return on investment than Naver. In addition to that, Busan Industrial is 2.31 times more volatile than Naver. It trades about 0.06 of its total potential returns per unit of risk. Naver is currently generating about 0.18 per unit of volatility. If you would invest 16,800,000 in Naver on August 25, 2024 and sell it today you would earn a total of 2,200,000 from holding Naver or generate 13.1% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Busan Industrial Co vs. Naver
Performance |
| Timeline |
| Busan Industrial |
| Naver |
Busan Industrial and Naver Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Busan Industrial and Naver
The main advantage of trading using opposite Busan Industrial and Naver positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Busan Industrial position performs unexpectedly, Naver 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 Naver will offset losses from the drop in Naver's long position.| Busan Industrial vs. Taeyang Metal Industrial | Busan Industrial vs. Lake Materials Co | Busan Industrial vs. Asiana Airlines | Busan Industrial vs. Ssangyong Materials Corp |
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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.
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