Correlation Between Busan Ind and KBSTAR EURO

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

By analyzing existing cross correlation between Busan Ind and KBSTAR EURO STOXX, you can compare the effects of market volatilities on Busan Ind and KBSTAR EURO 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 KBSTAR EURO. Check out your portfolio center. Please also check ongoing floating volatility patterns of Busan Ind and KBSTAR EURO.

Diversification Opportunities for Busan Ind and KBSTAR EURO

-0.49

Correlation Coefficient

Busan Ind  KBSTAR EURO

Very good diversification

The 3 months correlation between Busan and KBSTAR is -0.49. Overlapping area represents the amount of risk that can be diversified away by holding Busan Ind and KBSTAR EURO STOXX in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on KBSTAR EURO STOXX 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 KBSTAR EURO. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of KBSTAR EURO STOXX has no effect on the direction of Busan Ind i.e., Busan Ind and KBSTAR EURO go up and down completely randomly.

Pair Corralation between Busan Ind and KBSTAR EURO

Assuming the 90 days trading horizon Busan Ind is expected to under-perform the KBSTAR EURO. In addition to that, Busan Ind is 2.49 times more volatile than KBSTAR EURO STOXX. It trades about -0.06 of its total potential returns per unit of risk. KBSTAR EURO STOXX is currently generating about 0.2 per unit of volatility. If you would invest  1,346,000  in KBSTAR EURO STOXX on December 23, 2024 and sell it today you would earn a total of  165,000  from holding KBSTAR EURO STOXX or generate 12.26% return on investment over 90 days.

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

Busan Ind  vs.  KBSTAR EURO STOXX

Busan Ind

Risk-Adjusted Performance

Very Weak

Over the last 90 days Busan Ind has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

KBSTAR EURO STOXX

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in KBSTAR EURO STOXX are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, KBSTAR EURO sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Busan Ind and KBSTAR EURO

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

The idea behind Busan Ind and KBSTAR EURO STOXX 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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.