Correlation Between Busan Industrial and Samyang Foods

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

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

Diversification Opportunities for Busan Industrial and Samyang Foods

0.84

Correlation Coefficient

Busan Industrial  Samyang Foods

Very poor diversification

The 3 months correlation between Busan and Samyang is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding Busan Industrial Co and Samyang Foods Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Samyang Foods and Busan Industrial 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 Industrial Co are associated (or correlated) with Samyang Foods. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Samyang Foods has no effect on the direction of Busan Industrial i.e., Busan Industrial and Samyang Foods go up and down completely randomly.

Pair Corralation between Busan Industrial and Samyang Foods

Assuming the 90 days trading horizon Busan Industrial Co is expected to generate 1.97 times more return on investment than Samyang Foods. However, Busan Industrial is 1.97 times more volatile than Samyang Foods Co. It trades about 0.16 of its potential returns per unit of risk. Samyang Foods Co is currently generating about 0.19 per unit of risk. If you would invest  5,320,000  in Busan Industrial Co on September 22, 2024 and sell it today you would earn a total of  2,540,000  from holding Busan Industrial Co or generate 47.74% return on investment over 90 days.

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

Busan Industrial Co  vs.  Samyang Foods Co

Busan Industrial

Risk-Adjusted Performance

11 of 100

Good

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

Samyang Foods

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Samyang Foods Co are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Samyang Foods sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Busan Industrial and Samyang Foods

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

The idea behind Busan Industrial Co and Samyang Foods 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.

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 Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.