Correlation Between Korea Environment and Busan Industrial
Can any of the company-specific risk be diversified away by investing in both Korea Environment and Busan 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 Korea Environment and Busan Industrial into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Korea Environment Technology and Busan Industrial Co, you can compare the effects of market volatilities on Korea Environment and Busan 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 Korea Environment with a short position of Busan Industrial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Korea Environment and Busan Industrial.
Diversification Opportunities for Korea Environment and Busan Industrial
0.71 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Korea and Busan is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding Korea Environment Technology and Busan Industrial Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Busan Industrial and Korea Environment 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 Korea Environment Technology are associated (or correlated) with Busan Industrial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Busan Industrial has no effect on the direction of Korea Environment i.e., Korea Environment and Busan Industrial go up and down completely randomly.
Pair Corralation between Korea Environment and Busan Industrial
Assuming the 90 days trading horizon Korea Environment Technology is expected to generate 0.6 times more return on investment than Busan Industrial. However, Korea Environment Technology is 1.66 times less risky than Busan Industrial. It trades about 0.26 of its potential returns per unit of risk. Busan Industrial Co is currently generating about -0.23 per unit of risk. If you would invest 839,938 in Korea Environment Technology on October 15, 2024 and sell it today you would earn a total of 53,062 from holding Korea Environment Technology or generate 6.32% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Korea Environment Technology vs. Busan Industrial Co
Performance |
| Timeline |
| Korea Environment |
| Busan Industrial |
Korea Environment and Busan Industrial Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Korea Environment and Busan Industrial
The main advantage of trading using opposite Korea Environment and Busan Industrial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Korea Environment position performs unexpectedly, Busan 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 Busan Industrial will offset losses from the drop in Busan Industrial's long position.| Korea Environment vs. INSUN Environmental New | Korea Environment vs. LEENO Industrial | Korea Environment vs. Kmw Inc | Korea Environment vs. NICE Information Service |
| Busan Industrial vs. Fine Besteel Co | Busan Industrial vs. Daehan Steel | Busan Industrial vs. Shin Steel Co | Busan Industrial vs. Jin Air 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.
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