Correlation Between BHI and Lee Ku
Can any of the company-specific risk be diversified away by investing in both BHI and Lee Ku 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 Lee Ku into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between BHI Co and Lee Ku Industrial, you can compare the effects of market volatilities on BHI and Lee Ku 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 Lee Ku. Check out your portfolio center. Please also check ongoing floating volatility patterns of BHI and Lee Ku.
Diversification Opportunities for BHI and Lee Ku
Pay attention - limited upside
The 3 months correlation between BHI and Lee is -0.75. Overlapping area represents the amount of risk that can be diversified away by holding BHI Co and Lee Ku Industrial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lee Ku Industrial 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 Lee Ku. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lee Ku Industrial has no effect on the direction of BHI i.e., BHI and Lee Ku go up and down completely randomly.
Pair Corralation between BHI and Lee Ku
Assuming the 90 days trading horizon BHI Co is expected to generate 2.33 times more return on investment than Lee Ku. However, BHI is 2.33 times more volatile than Lee Ku Industrial. It trades about 0.25 of its potential returns per unit of risk. Lee Ku Industrial is currently generating about 0.13 per unit of risk. If you would invest 1,440,000 in BHI Co on October 17, 2024 and sell it today you would earn a total of 301,000 from holding BHI Co or generate 20.9% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
BHI Co vs. Lee Ku Industrial
Performance |
| Timeline |
| BHI Co |
| Lee Ku Industrial |
BHI and Lee Ku Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with BHI and Lee Ku
The main advantage of trading using opposite BHI and Lee Ku positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BHI position performs unexpectedly, Lee Ku 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 Lee Ku will offset losses from the drop in Lee Ku's long position.The idea behind BHI Co and Lee Ku Industrial 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.| Lee Ku vs. Haitai Confectionery Foods | Lee Ku vs. Orbitech Co | Lee Ku vs. KMH Hitech Co | Lee Ku vs. Samyang Foods 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.
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