Correlation Between Aurora World and Busan Industrial
Can any of the company-specific risk be diversified away by investing in both Aurora World 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 Aurora World and Busan Industrial into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Aurora World and Busan Industrial Co, you can compare the effects of market volatilities on Aurora World 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 Aurora World with a short position of Busan Industrial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Aurora World and Busan Industrial.
Diversification Opportunities for Aurora World and Busan Industrial
0.73 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Aurora and Busan is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding Aurora World and Busan Industrial Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Busan Industrial and Aurora World 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 Aurora World 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 Aurora World i.e., Aurora World and Busan Industrial go up and down completely randomly.
Pair Corralation between Aurora World and Busan Industrial
Assuming the 90 days trading horizon Aurora World is expected to generate 43.2 times less return on investment than Busan Industrial. But when comparing it to its historical volatility, Aurora World is 5.28 times less risky than Busan Industrial. It trades about 0.03 of its potential returns per unit of risk. Busan Industrial Co is currently generating about 0.22 of returns per unit of risk over similar time horizon. If you would invest 5,630,000 in Busan Industrial Co on September 24, 2024 and sell it today you would earn a total of 2,230,000 from holding Busan Industrial Co or generate 39.61% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Aurora World vs. Busan Industrial Co
Performance |
| Timeline |
| Aurora World |
| Busan Industrial |
Aurora World and Busan Industrial Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Aurora World and Busan Industrial
The main advantage of trading using opposite Aurora World and Busan Industrial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Aurora World 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.| Aurora World vs. Woori Technology Investment | Aurora World vs. Samsung Card Co | Aurora World vs. Korea Real Estate | Aurora World vs. CHOROKBAEM PANY Co |
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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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.
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