Correlation Between Bosung Power and Korea Information

Can any of the company-specific risk be diversified away by investing in both Bosung Power and Korea Information 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 Bosung Power and Korea Information into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Bosung Power Technology and Korea Information Engineering, you can compare the effects of market volatilities on Bosung Power and Korea Information 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 Bosung Power with a short position of Korea Information. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bosung Power and Korea Information.

Diversification Opportunities for Bosung Power and Korea Information

0.24

Correlation Coefficient

Bosung Power  Korea Information

Modest diversification

The 3 months correlation between Bosung and Korea is 0.24. Overlapping area represents the amount of risk that can be diversified away by holding Bosung Power Technology and Korea Information Engineering in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Korea Information and Bosung Power 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 Bosung Power Technology are associated (or correlated) with Korea Information. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Korea Information has no effect on the direction of Bosung Power i.e., Bosung Power and Korea Information go up and down completely randomly.

Pair Corralation between Bosung Power and Korea Information

Assuming the 90 days trading horizon Bosung Power Technology is expected to generate 0.89 times more return on investment than Korea Information. However, Bosung Power Technology is 1.12 times less risky than Korea Information. It trades about 0.37 of its potential returns per unit of risk. Korea Information Engineering is currently generating about -0.02 per unit of risk. If you would invest  261,500  in Bosung Power Technology on October 24, 2024 and sell it today you would earn a total of  39,500  from holding Bosung Power Technology or generate 15.11% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Bosung Power Technology  vs.  Korea Information Engineering

Bosung Power Technology

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Bosung Power Technology has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Bosung Power is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Korea Information

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Korea Information Engineering has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Korea Information is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Bosung Power and Korea Information

The main advantage of trading using opposite Bosung Power and Korea Information positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bosung Power position performs unexpectedly, Korea Information 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 Korea Information will offset losses from the drop in Korea Information's long position.

The idea behind Bosung Power Technology and Korea Information Engineering 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.

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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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.