Correlation Between LB Investment and Jeju Bank
Can any of the company-specific risk be diversified away by investing in both LB Investment and Jeju Bank 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 LB Investment and Jeju Bank into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between LB Investment and Jeju Bank, you can compare the effects of market volatilities on LB Investment and Jeju Bank 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 LB Investment with a short position of Jeju Bank. Check out your portfolio center. Please also check ongoing floating volatility patterns of LB Investment and Jeju Bank.
Diversification Opportunities for LB Investment and Jeju Bank
0.5 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between 309960 and Jeju is 0.5. Overlapping area represents the amount of risk that can be diversified away by holding LB Investment and Jeju Bank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Jeju Bank and LB Investment 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 LB Investment are associated (or correlated) with Jeju Bank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Jeju Bank has no effect on the direction of LB Investment i.e., LB Investment and Jeju Bank go up and down completely randomly.
Pair Corralation between LB Investment and Jeju Bank
Assuming the 90 days trading horizon LB Investment is expected to under-perform the Jeju Bank. But the stock apears to be less risky and, when comparing its historical volatility, LB Investment is 1.18 times less risky than Jeju Bank. The stock trades about -0.06 of its potential returns per unit of risk. The Jeju Bank is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest 809,000 in Jeju Bank on October 17, 2024 and sell it today you would earn a total of 10,000 from holding Jeju Bank or generate 1.24% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
LB Investment vs. Jeju Bank
Performance |
| Timeline |
| LB Investment |
| Jeju Bank |
LB Investment and Jeju Bank Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with LB Investment and Jeju Bank
The main advantage of trading using opposite LB Investment and Jeju Bank positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if LB Investment position performs unexpectedly, Jeju Bank 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 Jeju Bank will offset losses from the drop in Jeju Bank's long position.| LB Investment vs. Kbi Metal Co | LB Investment vs. Duksan Hi Metal | LB Investment vs. Shinhan Inverse Copper | LB Investment vs. Seoyon Topmetal Co |
| Jeju Bank vs. System and Application | Jeju Bank vs. Daishin Information Communications | Jeju Bank vs. Korea Information Engineering | Jeju Bank vs. Nice Information Telecommunication |
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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..
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