Correlation Between Busan Industrial and Zinus

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

Diversification Opportunities for Busan Industrial and Zinus

0.56

Correlation Coefficient

Busan Industrial  Zinus

Very weak diversification

The 3 months correlation between Busan and Zinus is 0.56. Overlapping area represents the amount of risk that can be diversified away by holding Busan Industrial Co and Zinus Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Zinus Inc 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 Zinus. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Zinus Inc has no effect on the direction of Busan Industrial i.e., Busan Industrial and Zinus go up and down completely randomly.

Pair Corralation between Busan Industrial and Zinus

Assuming the 90 days trading horizon Busan Industrial is expected to generate 1.33 times less return on investment than Zinus. In addition to that, Busan Industrial is 1.31 times more volatile than Zinus Inc. It trades about 0.09 of its total potential returns per unit of risk. Zinus Inc is currently generating about 0.15 per unit of volatility. If you would invest  1,237,273  in Zinus Inc on September 23, 2024 and sell it today you would earn a total of  1,107,727  from holding Zinus Inc or generate 89.53% return on investment over 90 days.

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

Busan Industrial Co  vs.  Zinus Inc

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.

Zinus Inc

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Zinus Inc are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Zinus sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Busan Industrial and Zinus

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

The idea behind Busan Industrial Co and Zinus Inc 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.