Correlation Between CJ ENM and Industrial Bank
Can any of the company-specific risk be diversified away by investing in both CJ ENM and Industrial Bank 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 CJ ENM and Industrial Bank into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between CJ ENM and Industrial Bank, you can compare the effects of market volatilities on CJ ENM and Industrial Bank 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 CJ ENM with a short position of Industrial Bank. Check out your portfolio center. Please also check ongoing floating volatility patterns of CJ ENM and Industrial Bank.
Diversification Opportunities for CJ ENM and Industrial Bank
-0.65 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between 035760 and Industrial is -0.65. Overlapping area represents the amount of risk that can be diversified away by holding CJ ENM and Industrial Bank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Industrial Bank and CJ ENM 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 CJ ENM are associated (or correlated) with Industrial Bank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Industrial Bank has no effect on the direction of CJ ENM i.e., CJ ENM and Industrial Bank go up and down completely randomly.
Pair Corralation between CJ ENM and Industrial Bank
Assuming the 90 days trading horizon CJ ENM is expected to generate 3.62 times more return on investment than Industrial Bank. However, CJ ENM is 3.62 times more volatile than Industrial Bank. It trades about 0.1 of its potential returns per unit of risk. Industrial Bank is currently generating about 0.27 per unit of risk. If you would invest 6,190,000 in CJ ENM on September 5, 2024 and sell it today you would earn a total of 390,000 from holding CJ ENM or generate 6.3% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
CJ ENM vs. Industrial Bank
Performance |
| Timeline |
| CJ ENM |
| Industrial Bank |
CJ ENM and Industrial Bank Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with CJ ENM and Industrial Bank
The main advantage of trading using opposite CJ ENM and Industrial Bank positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CJ ENM position performs unexpectedly, Industrial Bank 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 Industrial Bank will offset losses from the drop in Industrial Bank's long position.The idea behind CJ ENM and Industrial Bank pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.| Industrial Bank vs. Dongjin Semichem Co | Industrial Bank vs. AhnLab Inc | Industrial Bank vs. Posco ICT | Industrial Bank vs. CJ ENM |
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 Transaction History module to view history of all your transactions and understand their impact on performance.
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