Correlation Between Korea New and Busan Ind
Can any of the company-specific risk be diversified away by investing in both Korea New and Busan Ind 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 New and Busan Ind into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Korea New Network and Busan Ind, you can compare the effects of market volatilities on Korea New and Busan Ind 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 New with a short position of Busan Ind. Check out your portfolio center. Please also check ongoing floating volatility patterns of Korea New and Busan Ind.
Diversification Opportunities for Korea New and Busan Ind
Very weak diversification
The 3 months correlation between Korea and Busan is 0.5. Overlapping area represents the amount of risk that can be diversified away by holding Korea New Network and Busan Ind in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Busan Ind and Korea New 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 New Network are associated (or correlated) with Busan Ind. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Busan Ind has no effect on the direction of Korea New i.e., Korea New and Busan Ind go up and down completely randomly.
Pair Corralation between Korea New and Busan Ind
Assuming the 90 days trading horizon Korea New Network is expected to under-perform the Busan Ind. But the stock apears to be less risky and, when comparing its historical volatility, Korea New Network is 2.65 times less risky than Busan Ind. The stock trades about -0.03 of its potential returns per unit of risk. The Busan Ind is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest 5,280,000 in Busan Ind on August 27, 2024 and sell it today you would earn a total of 220,000 from holding Busan Ind or generate 4.17% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Korea New Network vs. Busan Ind
Performance |
| Timeline |
| Korea New Network |
| Busan Ind |
Korea New and Busan Ind Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Korea New and Busan Ind
The main advantage of trading using opposite Korea New and Busan Ind positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Korea New position performs unexpectedly, Busan Ind 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 Ind will offset losses from the drop in Busan Ind's long position.| Korea New vs. Samsung Electronics Co | Korea New vs. Samsung Electronics Co | Korea New vs. LG Energy Solution | Korea New vs. SK Hynix |
| Busan Ind vs. Jinro Distillers Co | Busan Ind vs. Sam Yang Foods | Busan Ind vs. Daelim Industrial Co | Busan Ind vs. Haesung 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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.
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