Correlation Between Busan Ind and Shinhan Inverse

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

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

Diversification Opportunities for Busan Ind and Shinhan Inverse

0.63

Correlation Coefficient

Busan Ind  Shinhan Inverse

Poor diversification

The 3 months correlation between Busan and Shinhan is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding Busan Ind and Shinhan Inverse Copper in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shinhan Inverse Copper 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 Shinhan Inverse. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shinhan Inverse Copper has no effect on the direction of Busan Ind i.e., Busan Ind and Shinhan Inverse go up and down completely randomly.

Pair Corralation between Busan Ind and Shinhan Inverse

Assuming the 90 days trading horizon Busan Ind is expected to generate 2.5 times more return on investment than Shinhan Inverse. However, Busan Ind is 2.5 times more volatile than Shinhan Inverse Copper. It trades about 0.01 of its potential returns per unit of risk. Shinhan Inverse Copper is currently generating about 0.01 per unit of risk. If you would invest  7,868,501  in Busan Ind on October 1, 2024 and sell it today you would lose (358,501) from holding Busan Ind or give up 4.56% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	95.46%
Values	Daily Returns

Busan Ind  vs.  Shinhan Inverse Copper

Busan Ind

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Busan Ind are ranked lower than 10 (%) 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.

Shinhan Inverse Copper

Risk-Adjusted Performance

14 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Shinhan Inverse Copper are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Shinhan Inverse sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Busan Ind and Shinhan Inverse

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

The idea behind Busan Ind and Shinhan Inverse Copper 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.

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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.