Correlation Between Busan Ind and Tway Air

Can any of the company-specific risk be diversified away by investing in both Busan Ind and Tway Air 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 Busan Ind and Tway Air into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Busan Ind and Tway Air Co, you can compare the effects of market volatilities on Busan Ind and Tway Air 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 Busan Ind with a short position of Tway Air. Check out your portfolio center. Please also check ongoing floating volatility patterns of Busan Ind and Tway Air.

Diversification Opportunities for Busan Ind and Tway Air

-0.28

Correlation Coefficient

Busan Ind  Tway Air

Very good diversification

The 3 months correlation between Busan and Tway is -0.28. Overlapping area represents the amount of risk that can be diversified away by holding Busan Ind and Tway Air Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tway Air and Busan Ind 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 Busan Ind are associated (or correlated) with Tway Air. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tway Air has no effect on the direction of Busan Ind i.e., Busan Ind and Tway Air go up and down completely randomly.

Pair Corralation between Busan Ind and Tway Air

Assuming the 90 days trading horizon Busan Ind is expected to generate 1.56 times less return on investment than Tway Air. But when comparing it to its historical volatility, Busan Ind is 1.04 times less risky than Tway Air. It trades about 0.01 of its potential returns per unit of risk. Tway Air Co is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  239,000  in Tway Air Co on September 13, 2024 and sell it today you would earn a total of  24,000  from holding Tway Air Co or generate 10.04% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Busan Ind  vs.  Tway Air Co

Busan Ind

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Busan Ind are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Busan Ind sustained solid returns over the last few months and may actually be approaching a breakup point.

Tway Air

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Busan Ind and Tway Air

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

The idea behind Busan Ind and Tway Air Co 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.