Correlation Between Industrial Bank and Korea Petro
Can any of the company-specific risk be diversified away by investing in both Industrial Bank and Korea Petro 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 Petro 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 Petro Chemical, you can compare the effects of market volatilities on Industrial Bank and Korea Petro 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 Petro. Check out your portfolio center. Please also check ongoing floating volatility patterns of Industrial Bank and Korea Petro.
Diversification Opportunities for Industrial Bank and Korea Petro
0.78 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Industrial and Korea is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding Industrial Bank and Korea Petro Chemical in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Korea Petro Chemical 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 Petro. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Korea Petro Chemical has no effect on the direction of Industrial Bank i.e., Industrial Bank and Korea Petro go up and down completely randomly.
Pair Corralation between Industrial Bank and Korea Petro
Assuming the 90 days trading horizon Industrial Bank is expected to generate 98.69 times less return on investment than Korea Petro. But when comparing it to its historical volatility, Industrial Bank is 4.33 times less risky than Korea Petro. It trades about 0.01 of its potential returns per unit of risk. Korea Petro Chemical is currently generating about 0.19 of returns per unit of risk over similar time horizon. If you would invest 9,110,000 in Korea Petro Chemical on November 27, 2024 and sell it today you would earn a total of 1,000,000 from holding Korea Petro Chemical or generate 10.98% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Industrial Bank vs. Korea Petro Chemical
Performance |
| Timeline |
| Industrial Bank |
| Korea Petro Chemical |
Industrial Bank and Korea Petro Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Industrial Bank and Korea Petro
The main advantage of trading using opposite Industrial Bank and Korea Petro positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Industrial Bank position performs unexpectedly, Korea Petro 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 Petro will offset losses from the drop in Korea Petro's long position.| Industrial Bank vs. Hanjoo Light Metal | Industrial Bank vs. Sempio Foods Co | Industrial Bank vs. Dongil Metal Co | Industrial Bank vs. Daesung Hi Tech Co |
| Korea Petro vs. Samyoung Electronics Co | Korea Petro vs. Korea Electronic Certification | Korea Petro vs. Sungho Electronics Corp | Korea Petro vs. TJ media 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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