Correlation Between Industrial Bank and Miwon Chemical
Can any of the company-specific risk be diversified away by investing in both Industrial Bank and Miwon Chemical 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 Miwon Chemical into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Industrial Bank and Miwon Chemical, you can compare the effects of market volatilities on Industrial Bank and Miwon Chemical 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 Miwon Chemical. Check out your portfolio center. Please also check ongoing floating volatility patterns of Industrial Bank and Miwon Chemical.
Diversification Opportunities for Industrial Bank and Miwon Chemical
-0.5 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Industrial and Miwon is -0.5. Overlapping area represents the amount of risk that can be diversified away by holding Industrial Bank and Miwon Chemical in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Miwon 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 Miwon Chemical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Miwon Chemical has no effect on the direction of Industrial Bank i.e., Industrial Bank and Miwon Chemical go up and down completely randomly.
Pair Corralation between Industrial Bank and Miwon Chemical
Assuming the 90 days trading horizon Industrial Bank is expected to generate 1.23 times more return on investment than Miwon Chemical. However, Industrial Bank is 1.23 times more volatile than Miwon Chemical. It trades about 0.06 of its potential returns per unit of risk. Miwon Chemical is currently generating about -0.14 per unit of risk. If you would invest 1,450,000 in Industrial Bank on August 29, 2024 and sell it today you would earn a total of 19,000 from holding Industrial Bank or generate 1.31% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Industrial Bank vs. Miwon Chemical
Performance |
| Timeline |
| Industrial Bank |
| Miwon Chemical |
Industrial Bank and Miwon Chemical Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Industrial Bank and Miwon Chemical
The main advantage of trading using opposite Industrial Bank and Miwon Chemical positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Industrial Bank position performs unexpectedly, Miwon Chemical 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 Miwon Chemical will offset losses from the drop in Miwon Chemical's long position.| Industrial Bank vs. TOPMATERIAL LTD | Industrial Bank vs. LS Materials | Industrial Bank vs. Taegu Broadcasting | Industrial Bank vs. Top Material Co |
| Miwon Chemical vs. Cheryong Industrial CoLtd | Miwon Chemical vs. InfoBank | Miwon Chemical vs. Total Soft Bank | Miwon Chemical vs. Seoyon Topmetal 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.
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