Correlation Between Busan Industrial and Youngsin Metal

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

Diversification Opportunities for Busan Industrial and Youngsin Metal

-0.5

Correlation Coefficient

Busan Industrial  Youngsin Metal

Very good diversification

The 3 months correlation between Busan and Youngsin is -0.5. Overlapping area represents the amount of risk that can be diversified away by holding Busan Industrial Co and Youngsin Metal Industrial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Youngsin Metal Industrial 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 Youngsin Metal. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Youngsin Metal Industrial has no effect on the direction of Busan Industrial i.e., Busan Industrial and Youngsin Metal go up and down completely randomly.

Pair Corralation between Busan Industrial and Youngsin Metal

Assuming the 90 days trading horizon Busan Industrial Co is expected to generate 2.72 times more return on investment than Youngsin Metal. However, Busan Industrial is 2.72 times more volatile than Youngsin Metal Industrial. It trades about 0.09 of its potential returns per unit of risk. Youngsin Metal Industrial is currently generating about -0.2 per unit of risk. If you would invest  5,190,000  in Busan Industrial Co on August 31, 2024 and sell it today you would earn a total of  1,180,000  from holding Busan Industrial Co or generate 22.74% return on investment over 90 days.

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

Busan Industrial Co  vs.  Youngsin Metal Industrial

Busan Industrial

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Busan Industrial Co are ranked lower than 6 (%) 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.

Youngsin Metal Industrial

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Youngsin Metal Industrial 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 December 2024. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Busan Industrial and Youngsin Metal

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

The idea behind Busan Industrial Co and Youngsin Metal Industrial 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.