Correlation Between Busan Industrial and Raphas

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

Diversification Opportunities for Busan Industrial and Raphas

-0.3

Correlation Coefficient

Busan Industrial  Raphas

Very good diversification

The 3 months correlation between Busan and Raphas is -0.3. Overlapping area represents the amount of risk that can be diversified away by holding Busan Industrial Co and Raphas Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Raphas 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 Raphas. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Raphas has no effect on the direction of Busan Industrial i.e., Busan Industrial and Raphas go up and down completely randomly.

Pair Corralation between Busan Industrial and Raphas

Assuming the 90 days trading horizon Busan Industrial Co is expected to under-perform the Raphas. But the stock apears to be less risky and, when comparing its historical volatility, Busan Industrial Co is 1.34 times less risky than Raphas. The stock trades about -0.06 of its potential returns per unit of risk. The Raphas Co is currently generating about -0.01 of returns per unit of risk over similar time horizon. If you would invest  1,539,000  in Raphas Co on December 24, 2024 and sell it today you would lose (64,000) from holding Raphas Co or give up 4.16% of portfolio value over 90 days.

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

Busan Industrial Co  vs.  Raphas 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.

Raphas

Risk-Adjusted Performance

Weak

Over the last 90 days Raphas Co has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Raphas is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Busan Industrial and Raphas

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

The idea behind Busan Industrial Co and Raphas 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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.