Correlation Between Busan Industrial and TK Chemical
Can any of the company-specific risk be diversified away by investing in both Busan Industrial and TK 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 TK 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 TK Chemical, you can compare the effects of market volatilities on Busan Industrial and TK 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 TK Chemical. Check out your portfolio center. Please also check ongoing floating volatility patterns of Busan Industrial and TK Chemical.
Diversification Opportunities for Busan Industrial and TK Chemical
-0.34 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Busan and 104480 is -0.34. Overlapping area represents the amount of risk that can be diversified away by holding Busan Industrial Co and TK Chemical in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TK 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 TK Chemical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of TK Chemical has no effect on the direction of Busan Industrial i.e., Busan Industrial and TK Chemical go up and down completely randomly.
Pair Corralation between Busan Industrial and TK Chemical
Assuming the 90 days trading horizon Busan Industrial Co is expected to generate 0.99 times more return on investment than TK Chemical. However, Busan Industrial Co is 1.01 times less risky than TK Chemical. It trades about -0.03 of its potential returns per unit of risk. TK Chemical is currently generating about -0.07 per unit of risk. If you would invest 8,666,052 in Busan Industrial Co on August 25, 2024 and sell it today you would lose (3,166,052) from holding Busan Industrial Co or give up 36.53% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Busan Industrial Co vs. TK Chemical
Performance |
| Timeline |
| Busan Industrial |
| TK Chemical |
Busan Industrial and TK Chemical Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Busan Industrial and TK Chemical
The main advantage of trading using opposite Busan Industrial and TK Chemical positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Busan Industrial position performs unexpectedly, TK 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 TK Chemical will offset losses from the drop in TK Chemical'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 |
| TK Chemical vs. Busan Industrial Co | TK Chemical vs. Busan Ind | TK Chemical vs. Mirae Asset Daewoo | TK Chemical vs. UNISEM 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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.
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