Correlation Between Industrial Bank and Korea Industrial
Can any of the company-specific risk be diversified away by investing in both Industrial Bank and Korea Industrial 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 Industrial Bank and Korea Industrial into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Industrial Bank and Korea Industrial Co, you can compare the effects of market volatilities on Industrial Bank and Korea Industrial 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 Industrial Bank with a short position of Korea Industrial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Industrial Bank and Korea Industrial.
Diversification Opportunities for Industrial Bank and Korea Industrial
0.22 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Industrial and Korea is 0.22. Overlapping area represents the amount of risk that can be diversified away by holding Industrial Bank and Korea Industrial Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Korea Industrial and Industrial Bank 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 Industrial Bank are associated (or correlated) with Korea Industrial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Korea Industrial has no effect on the direction of Industrial Bank i.e., Industrial Bank and Korea Industrial go up and down completely randomly.
Pair Corralation between Industrial Bank and Korea Industrial
Assuming the 90 days trading horizon Industrial Bank is expected to generate 1.43 times less return on investment than Korea Industrial. But when comparing it to its historical volatility, Industrial Bank is 2.79 times less risky than Korea Industrial. It trades about 0.6 of its potential returns per unit of risk. Korea Industrial Co is currently generating about 0.31 of returns per unit of risk over similar time horizon. If you would invest 258,500 in Korea Industrial Co on October 30, 2024 and sell it today you would earn a total of 19,000 from holding Korea Industrial Co or generate 7.35% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Industrial Bank vs. Korea Industrial Co
Performance |
| Timeline |
| Industrial Bank |
| Korea Industrial |
Industrial Bank and Korea Industrial Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Industrial Bank and Korea Industrial
The main advantage of trading using opposite Industrial Bank and Korea Industrial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Industrial Bank position performs unexpectedly, Korea Industrial 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 Korea Industrial will offset losses from the drop in Korea Industrial's long position.| Industrial Bank vs. BIT Computer Co | Industrial Bank vs. V One Tech Co | Industrial Bank vs. KMH Hitech Co | Industrial Bank vs. Dongwoon Anatech Co |
| Korea Industrial vs. INFINITT Healthcare Co | Korea Industrial vs. LG Household Healthcare | Korea Industrial vs. Fine Besteel Co | Korea Industrial vs. Hwangkum Steel Technology |
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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.
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