Correlation Between Busan Industrial and Lindeman Asia
Can any of the company-specific risk be diversified away by investing in both Busan Industrial and Lindeman Asia 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 Lindeman Asia 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 Lindeman Asia Investment, you can compare the effects of market volatilities on Busan Industrial and Lindeman Asia 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 Lindeman Asia. Check out your portfolio center. Please also check ongoing floating volatility patterns of Busan Industrial and Lindeman Asia.
Diversification Opportunities for Busan Industrial and Lindeman Asia
-0.65 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Busan and Lindeman is -0.65. Overlapping area represents the amount of risk that can be diversified away by holding Busan Industrial Co and Lindeman Asia Investment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lindeman Asia Investment 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 Lindeman Asia. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lindeman Asia Investment has no effect on the direction of Busan Industrial i.e., Busan Industrial and Lindeman Asia go up and down completely randomly.
Pair Corralation between Busan Industrial and Lindeman Asia
Assuming the 90 days trading horizon Busan Industrial Co is expected to generate 2.11 times more return on investment than Lindeman Asia. However, Busan Industrial is 2.11 times more volatile than Lindeman Asia Investment. It trades about 0.07 of its potential returns per unit of risk. Lindeman Asia Investment is currently generating about -0.19 per unit of risk. If you would invest 5,230,000 in Busan Industrial Co on September 3, 2024 and sell it today you would earn a total of 910,000 from holding Busan Industrial Co or generate 17.4% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Busan Industrial Co vs. Lindeman Asia Investment
Performance |
| Timeline |
| Busan Industrial |
| Lindeman Asia Investment |
Busan Industrial and Lindeman Asia Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Busan Industrial and Lindeman Asia
The main advantage of trading using opposite Busan Industrial and Lindeman Asia positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Busan Industrial position performs unexpectedly, Lindeman Asia 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 Lindeman Asia will offset losses from the drop in Lindeman Asia's long position.| Busan Industrial vs. Pureun Mutual Savings | Busan Industrial vs. Atinum Investment Co | Busan Industrial vs. Korea Investment Holdings | Busan Industrial vs. Hanjoo Light Metal |
| Lindeman Asia vs. Atinum Investment Co | Lindeman Asia vs. SBI Investment KOREA | Lindeman Asia vs. Busan Industrial Co | Lindeman Asia 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.
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