Correlation Between Korean Drug and BNK Financial
Can any of the company-specific risk be diversified away by investing in both Korean Drug and BNK Financial 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 Korean Drug and BNK Financial into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Korean Drug Co and BNK Financial Group, you can compare the effects of market volatilities on Korean Drug and BNK Financial 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 Korean Drug with a short position of BNK Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Korean Drug and BNK Financial.
Diversification Opportunities for Korean Drug and BNK Financial
0.27 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Korean and BNK is 0.27. Overlapping area represents the amount of risk that can be diversified away by holding Korean Drug Co and BNK Financial Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BNK Financial Group and Korean Drug 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 Korean Drug Co are associated (or correlated) with BNK Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BNK Financial Group has no effect on the direction of Korean Drug i.e., Korean Drug and BNK Financial go up and down completely randomly.
Pair Corralation between Korean Drug and BNK Financial
Assuming the 90 days trading horizon Korean Drug Co is expected to under-perform the BNK Financial. But the stock apears to be less risky and, when comparing its historical volatility, Korean Drug Co is 1.54 times less risky than BNK Financial. The stock trades about -0.19 of its potential returns per unit of risk. The BNK Financial Group is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest 984,000 in BNK Financial Group on August 30, 2024 and sell it today you would earn a total of 69,000 from holding BNK Financial Group or generate 7.01% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Korean Drug Co vs. BNK Financial Group
Performance |
| Timeline |
| Korean Drug |
| BNK Financial Group |
Korean Drug and BNK Financial Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Korean Drug and BNK Financial
The main advantage of trading using opposite Korean Drug and BNK Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Korean Drug position performs unexpectedly, BNK Financial 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 BNK Financial will offset losses from the drop in BNK Financial's long position.| Korean Drug vs. AnterogenCoLtd | Korean Drug vs. Busan Industrial Co | Korean Drug vs. Busan Ind | Korean Drug vs. Shinhan WTI Futures |
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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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .
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