Correlation Between BHI and CJ ENM
Can any of the company-specific risk be diversified away by investing in both BHI and CJ ENM 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 CJ ENM into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between BHI Co and CJ ENM, you can compare the effects of market volatilities on BHI and CJ ENM 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 CJ ENM. Check out your portfolio center. Please also check ongoing floating volatility patterns of BHI and CJ ENM.
Diversification Opportunities for BHI and CJ ENM
Very good diversification
The 3 months correlation between BHI and 035760 is -0.33. Overlapping area represents the amount of risk that can be diversified away by holding BHI Co and CJ ENM in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CJ ENM 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 CJ ENM. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CJ ENM has no effect on the direction of BHI i.e., BHI and CJ ENM go up and down completely randomly.
Pair Corralation between BHI and CJ ENM
Assuming the 90 days trading horizon BHI Co is expected to generate 1.61 times more return on investment than CJ ENM. However, BHI is 1.61 times more volatile than CJ ENM. It trades about 0.08 of its potential returns per unit of risk. CJ ENM is currently generating about -0.04 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 Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
BHI Co vs. CJ ENM
Performance |
| Timeline |
| BHI Co |
| CJ ENM |
BHI and CJ ENM Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with BHI and CJ ENM
The main advantage of trading using opposite BHI and CJ ENM positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BHI position performs unexpectedly, CJ ENM 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 CJ ENM will offset losses from the drop in CJ ENM's long position.| BHI vs. Korean Reinsurance Co | BHI vs. Korea Industrial Co | BHI vs. Hyunwoo Industrial Co | BHI vs. Lotte Non Life Insurance |
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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.
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