Correlation Between Busan Industrial and KEPCO Engineering
Can any of the company-specific risk be diversified away by investing in both Busan Industrial and KEPCO Engineering 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 KEPCO Engineering 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 KEPCO Engineering Construction, you can compare the effects of market volatilities on Busan Industrial and KEPCO Engineering 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 KEPCO Engineering. Check out your portfolio center. Please also check ongoing floating volatility patterns of Busan Industrial and KEPCO Engineering.
Diversification Opportunities for Busan Industrial and KEPCO Engineering
-0.36 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Busan and KEPCO is -0.36. Overlapping area represents the amount of risk that can be diversified away by holding Busan Industrial Co and KEPCO Engineering Construction in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on KEPCO Engineering 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 KEPCO Engineering. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of KEPCO Engineering has no effect on the direction of Busan Industrial i.e., Busan Industrial and KEPCO Engineering go up and down completely randomly.
Pair Corralation between Busan Industrial and KEPCO Engineering
Assuming the 90 days trading horizon Busan Industrial Co is expected to generate 1.3 times more return on investment than KEPCO Engineering. However, Busan Industrial is 1.3 times more volatile than KEPCO Engineering Construction. It trades about 0.04 of its potential returns per unit of risk. KEPCO Engineering Construction is currently generating about -0.02 per unit of risk. If you would invest 6,254,960 in Busan Industrial Co on September 12, 2024 and sell it today you would earn a total of 1,525,040 from holding Busan Industrial Co or generate 24.38% 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. KEPCO Engineering Construction
Performance |
| Timeline |
| Busan Industrial |
| KEPCO Engineering |
Busan Industrial and KEPCO Engineering Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Busan Industrial and KEPCO Engineering
The main advantage of trading using opposite Busan Industrial and KEPCO Engineering positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Busan Industrial position performs unexpectedly, KEPCO Engineering 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 KEPCO Engineering will offset losses from the drop in KEPCO Engineering's long position.| Busan Industrial vs. Samsung Electronics Co | Busan Industrial vs. Samsung Electronics Co | Busan Industrial vs. SK Hynix | Busan Industrial vs. POSCO Holdings |
| KEPCO Engineering vs. Hyundai Engineering Construction | KEPCO Engineering vs. Camus Engineering Construction | KEPCO Engineering vs. Solution Advanced Technology | KEPCO Engineering vs. Busan Industrial Co |
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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.
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