Correlation Between Formetal and Busan Ind
Can any of the company-specific risk be diversified away by investing in both Formetal 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 Formetal and Busan Ind into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Formetal Co and Busan Ind, you can compare the effects of market volatilities on Formetal 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 Formetal with a short position of Busan Ind. Check out your portfolio center. Please also check ongoing floating volatility patterns of Formetal and Busan Ind.
Diversification Opportunities for Formetal and Busan Ind
Poor diversification
The 3 months correlation between Formetal and Busan is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding Formetal Co and Busan Ind in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Busan Ind and Formetal 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 Formetal Co 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 Formetal i.e., Formetal and Busan Ind go up and down completely randomly.
Pair Corralation between Formetal and Busan Ind
Assuming the 90 days trading horizon Formetal is expected to generate 1.4 times less return on investment than Busan Ind. But when comparing it to its historical volatility, Formetal Co is 1.24 times less risky than Busan Ind. It trades about 0.02 of its potential returns per unit of risk. Busan Ind is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest 7,858,541 in Busan Ind on October 28, 2024 and sell it today you would earn a total of 361,459 from holding Busan Ind or generate 4.6% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Formetal Co vs. Busan Ind
Performance |
| Timeline |
| Formetal |
| Busan Ind |
Formetal and Busan Ind Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Formetal and Busan Ind
The main advantage of trading using opposite Formetal and Busan Ind positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Formetal 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.| Formetal vs. Seoam Machinery Industry | Formetal vs. Busan Industrial Co | Formetal vs. Busan Ind | Formetal vs. RPBio Inc |
| Busan Ind vs. Youl Chon Chemical | Busan Ind vs. Digital Power Communications | Busan Ind vs. Daewon Chemical Co | Busan Ind vs. Hanil Chemical Ind |
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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.
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