Correlation Between Busan Industrial and Pan Entertainment

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

Diversification Opportunities for Busan Industrial and Pan Entertainment

-0.55

Correlation Coefficient

Busan Industrial  Pan Entertainment

Excellent diversification

The 3 months correlation between Busan and Pan is -0.55. Overlapping area represents the amount of risk that can be diversified away by holding Busan Industrial Co and Pan Entertainment Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pan Entertainment 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 Pan Entertainment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pan Entertainment has no effect on the direction of Busan Industrial i.e., Busan Industrial and Pan Entertainment go up and down completely randomly.

Pair Corralation between Busan Industrial and Pan Entertainment

Assuming the 90 days trading horizon Busan Industrial Co is expected to under-perform the Pan Entertainment. But the stock apears to be less risky and, when comparing its historical volatility, Busan Industrial Co is 1.83 times less risky than Pan Entertainment. The stock trades about -0.04 of its potential returns per unit of risk. The Pan Entertainment Co is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  205,000  in Pan Entertainment Co on December 30, 2024 and sell it today you would earn a total of  71,500  from holding Pan Entertainment Co or generate 34.88% 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.  Pan Entertainment Co

Busan Industrial

Risk-Adjusted Performance

Very Weak

Over the last 90 days Busan Industrial Co has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pan Entertainment

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Pan Entertainment Co are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Pan Entertainment sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Busan Industrial and Pan Entertainment

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

The idea behind Busan Industrial Co and Pan Entertainment Co 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.