Correlation Between Busan Industrial and Daehan Synthetic

Can any of the company-specific risk be diversified away by investing in both Busan Industrial and Daehan Synthetic 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 Daehan Synthetic 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 Daehan Synthetic Fiber, you can compare the effects of market volatilities on Busan Industrial and Daehan Synthetic 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 Daehan Synthetic. Check out your portfolio center. Please also check ongoing floating volatility patterns of Busan Industrial and Daehan Synthetic.

Diversification Opportunities for Busan Industrial and Daehan Synthetic

-0.82

Correlation Coefficient

Busan Industrial  Daehan Synthetic

Pay attention - limited upside

The 3 months correlation between Busan and Daehan is -0.82. Overlapping area represents the amount of risk that can be diversified away by holding Busan Industrial Co and Daehan Synthetic Fiber in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Daehan Synthetic Fiber 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 Daehan Synthetic. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Daehan Synthetic Fiber has no effect on the direction of Busan Industrial i.e., Busan Industrial and Daehan Synthetic go up and down completely randomly.

Pair Corralation between Busan Industrial and Daehan Synthetic

Assuming the 90 days trading horizon Busan Industrial Co is expected to generate 5.66 times more return on investment than Daehan Synthetic. However, Busan Industrial is 5.66 times more volatile than Daehan Synthetic Fiber. It trades about 0.22 of its potential returns per unit of risk. Daehan Synthetic Fiber is currently generating about -0.5 per unit of risk. If you would invest  6,059,787  in Busan Industrial Co on October 4, 2024 and sell it today you would earn a total of  1,390,213  from holding Busan Industrial Co or generate 22.94% return on investment over 90 days.

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

Busan Industrial Co  vs.  Daehan Synthetic Fiber

Busan Industrial

Risk-Adjusted Performance

10 of 100

OK

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

Daehan Synthetic Fiber

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Daehan Synthetic Fiber has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Busan Industrial and Daehan Synthetic

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

The idea behind Busan Industrial Co and Daehan Synthetic Fiber 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.