Correlation Between Busan Industrial and Daesung Private

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

Diversification Opportunities for Busan Industrial and Daesung Private

0.76

Correlation Coefficient

Busan Industrial  Daesung Private

Poor diversification

The 3 months correlation between Busan and Daesung is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding Busan Industrial Co and Daesung Private Equity in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Daesung Private Equity 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 Daesung Private. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Daesung Private Equity has no effect on the direction of Busan Industrial i.e., Busan Industrial and Daesung Private go up and down completely randomly.

Pair Corralation between Busan Industrial and Daesung Private

Assuming the 90 days trading horizon Busan Industrial is expected to generate 1.09 times less return on investment than Daesung Private. But when comparing it to its historical volatility, Busan Industrial Co is 1.62 times less risky than Daesung Private. It trades about 0.17 of its potential returns per unit of risk. Daesung Private Equity is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  186,600  in Daesung Private Equity on October 22, 2024 and sell it today you would earn a total of  9,500  from holding Daesung Private Equity or generate 5.09% return on investment over 90 days.

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

Busan Industrial Co  vs.  Daesung Private Equity

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.

Daesung Private Equity

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Daesung Private Equity are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Daesung Private sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Busan Industrial and Daesung Private

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

The idea behind Busan Industrial Co and Daesung Private Equity 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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.