Correlation Between Industrial Bank and Seoul Electronics
Can any of the company-specific risk be diversified away by investing in both Industrial Bank and Seoul Electronics 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 Seoul Electronics into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Industrial Bank and Seoul Electronics Telecom, you can compare the effects of market volatilities on Industrial Bank and Seoul Electronics 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 Seoul Electronics. Check out your portfolio center. Please also check ongoing floating volatility patterns of Industrial Bank and Seoul Electronics.
Diversification Opportunities for Industrial Bank and Seoul Electronics
-0.6 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Industrial and Seoul is -0.6. Overlapping area represents the amount of risk that can be diversified away by holding Industrial Bank and Seoul Electronics Telecom in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Seoul Electronics Telecom 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 Seoul Electronics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Seoul Electronics Telecom has no effect on the direction of Industrial Bank i.e., Industrial Bank and Seoul Electronics go up and down completely randomly.
Pair Corralation between Industrial Bank and Seoul Electronics
Assuming the 90 days trading horizon Industrial Bank is expected to generate 0.62 times more return on investment than Seoul Electronics. However, Industrial Bank is 1.61 times less risky than Seoul Electronics. It trades about 0.19 of its potential returns per unit of risk. Seoul Electronics Telecom is currently generating about -0.42 per unit of risk. If you would invest 1,436,000 in Industrial Bank on September 3, 2024 and sell it today you would earn a total of 52,000 from holding Industrial Bank or generate 3.62% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Industrial Bank vs. Seoul Electronics Telecom
Performance |
| Timeline |
| Industrial Bank |
| Seoul Electronics Telecom |
Industrial Bank and Seoul Electronics Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Industrial Bank and Seoul Electronics
The main advantage of trading using opposite Industrial Bank and Seoul Electronics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Industrial Bank position performs unexpectedly, Seoul Electronics 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 Seoul Electronics will offset losses from the drop in Seoul Electronics' long position.| Industrial Bank vs. Kaonmedia Co | Industrial Bank vs. Bohae Brewery | Industrial Bank vs. Shinhan Inverse Silver | Industrial Bank vs. Digital Multimedia Technology |
| Seoul Electronics vs. DC Media Co | Seoul Electronics vs. KB Financial Group | Seoul Electronics vs. Barunson Entertainment Arts | Seoul Electronics vs. Tamul Multimedia 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..
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