Correlation Between Busan Industrial and NICE Information

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

Diversification Opportunities for Busan Industrial and NICE Information

0.66

Correlation Coefficient

Busan Industrial  NICE Information

Poor diversification

The 3 months correlation between Busan and NICE is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding Busan Industrial Co and NICE Information Service in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NICE Information Service 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 NICE Information. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NICE Information Service has no effect on the direction of Busan Industrial i.e., Busan Industrial and NICE Information go up and down completely randomly.

Pair Corralation between Busan Industrial and NICE Information

Assuming the 90 days trading horizon Busan Industrial Co is expected to generate 2.84 times more return on investment than NICE Information. However, Busan Industrial is 2.84 times more volatile than NICE Information Service. It trades about 0.08 of its potential returns per unit of risk. NICE Information Service is currently generating about 0.15 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  950,000  from holding Busan Industrial Co or generate 18.3% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.31%
Values	Daily Returns

Busan Industrial Co  vs.  NICE Information Service

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.

NICE Information Service

Risk-Adjusted Performance

12 of 100

Good

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

Pair Trading with Busan Industrial and NICE Information

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

The idea behind Busan Industrial Co and NICE Information Service 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.