Correlation Between BHI and Yuhan
Can any of the company-specific risk be diversified away by investing in both BHI and Yuhan 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 BHI and Yuhan into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between BHI Co and Yuhan, you can compare the effects of market volatilities on BHI and Yuhan 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 BHI with a short position of Yuhan. Check out your portfolio center. Please also check ongoing floating volatility patterns of BHI and Yuhan.
Diversification Opportunities for BHI and Yuhan
Significant diversification
The 3 months correlation between BHI and Yuhan is 0.04. Overlapping area represents the amount of risk that can be diversified away by holding BHI Co and Yuhan in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Yuhan and BHI 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 BHI Co are associated (or correlated) with Yuhan. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Yuhan has no effect on the direction of BHI i.e., BHI and Yuhan go up and down completely randomly.
Pair Corralation between BHI and Yuhan
Assuming the 90 days trading horizon BHI Co is expected to generate 1.43 times more return on investment than Yuhan. However, BHI is 1.43 times more volatile than Yuhan. It trades about 0.08 of its potential returns per unit of risk. Yuhan is currently generating about 0.08 per unit of risk. If you would invest 640,000 in BHI Co on November 2, 2024 and sell it today you would earn a total of 1,710,000 from holding BHI Co or generate 267.19% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
BHI Co vs. Yuhan
Performance |
| Timeline |
| BHI Co |
| Yuhan |
BHI and Yuhan Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with BHI and Yuhan
The main advantage of trading using opposite BHI and Yuhan positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BHI position performs unexpectedly, Yuhan 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 Yuhan will offset losses from the drop in Yuhan's long position.| BHI vs. Korean Reinsurance Co | BHI vs. Korea Industrial Co | BHI vs. Hyunwoo Industrial Co | BHI vs. Lotte Non Life Insurance |
| Yuhan vs. Dongil Metal Co | Yuhan vs. Heungkuk Metaltech CoLtd | Yuhan vs. Daishin Information Communications | Yuhan vs. SK Chemicals 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.
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