Correlation Between Industrial Bank and Geumhwa Plant
Can any of the company-specific risk be diversified away by investing in both Industrial Bank and Geumhwa Plant 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 Geumhwa Plant into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Industrial Bank and Geumhwa Plant Service, you can compare the effects of market volatilities on Industrial Bank and Geumhwa Plant 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 Geumhwa Plant. Check out your portfolio center. Please also check ongoing floating volatility patterns of Industrial Bank and Geumhwa Plant.
Diversification Opportunities for Industrial Bank and Geumhwa Plant
-0.32 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Industrial and Geumhwa is -0.32. Overlapping area represents the amount of risk that can be diversified away by holding Industrial Bank and Geumhwa Plant Service in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Geumhwa Plant Service 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 Geumhwa Plant. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Geumhwa Plant Service has no effect on the direction of Industrial Bank i.e., Industrial Bank and Geumhwa Plant go up and down completely randomly.
Pair Corralation between Industrial Bank and Geumhwa Plant
Assuming the 90 days trading horizon Industrial Bank is expected to generate 0.75 times more return on investment than Geumhwa Plant. However, Industrial Bank is 1.34 times less risky than Geumhwa Plant. It trades about 0.26 of its potential returns per unit of risk. Geumhwa Plant Service is currently generating about -0.28 per unit of risk. If you would invest 1,410,000 in Industrial Bank on September 1, 2024 and sell it today you would earn a total of 78,000 from holding Industrial Bank or generate 5.53% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Industrial Bank vs. Geumhwa Plant Service
Performance |
| Timeline |
| Industrial Bank |
| Geumhwa Plant Service |
Industrial Bank and Geumhwa Plant Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Industrial Bank and Geumhwa Plant
The main advantage of trading using opposite Industrial Bank and Geumhwa Plant positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Industrial Bank position performs unexpectedly, Geumhwa Plant 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 Geumhwa Plant will offset losses from the drop in Geumhwa Plant's long position.| Industrial Bank vs. Samsung Electronics Co | Industrial Bank vs. Samsung Electronics Co | Industrial Bank vs. KB Financial Group | Industrial Bank vs. Shinhan Financial Group |
| Geumhwa Plant vs. Korea New Network | Geumhwa Plant vs. ICD Co | Geumhwa Plant vs. DYPNF CoLtd | Geumhwa Plant vs. Busan Industrial 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.
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