Correlation Between Busan Industrial and Daewoo SBI

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

Diversification Opportunities for Busan Industrial and Daewoo SBI

0.33

Correlation Coefficient

Busan Industrial  Daewoo SBI

Weak diversification

The 3 months correlation between Busan and Daewoo is 0.33. Overlapping area represents the amount of risk that can be diversified away by holding Busan Industrial Co and Daewoo SBI SPAC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Daewoo SBI SPAC 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 Daewoo SBI. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Daewoo SBI SPAC has no effect on the direction of Busan Industrial i.e., Busan Industrial and Daewoo SBI go up and down completely randomly.

Pair Corralation between Busan Industrial and Daewoo SBI

Assuming the 90 days trading horizon Busan Industrial Co is expected to generate 1.63 times more return on investment than Daewoo SBI. However, Busan Industrial is 1.63 times more volatile than Daewoo SBI SPAC. It trades about 0.04 of its potential returns per unit of risk. Daewoo SBI SPAC is currently generating about -0.03 per unit of risk. If you would invest  6,343,363  in Busan Industrial Co on October 5, 2024 and sell it today you would earn a total of  1,356,637  from holding Busan Industrial Co or generate 21.39% return on investment over 90 days.

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

Busan Industrial Co  vs.  Daewoo SBI SPAC

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.

Daewoo SBI SPAC

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Daewoo SBI SPAC are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Daewoo SBI may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Busan Industrial and Daewoo SBI

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

The idea behind Busan Industrial Co and Daewoo SBI SPAC 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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.