Correlation Between Busan Industrial and WooDeumGee Farm

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

Diversification Opportunities for Busan Industrial and WooDeumGee Farm

-0.42

Correlation Coefficient

Busan Industrial  WooDeumGee Farm

Very good diversification

The 3 months correlation between Busan and WooDeumGee is -0.42. Overlapping area represents the amount of risk that can be diversified away by holding Busan Industrial Co and WooDeumGee Farm Co, in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on WooDeumGee Farm Co, 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 WooDeumGee Farm. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of WooDeumGee Farm Co, has no effect on the direction of Busan Industrial i.e., Busan Industrial and WooDeumGee Farm go up and down completely randomly.

Pair Corralation between Busan Industrial and WooDeumGee Farm

Assuming the 90 days trading horizon Busan Industrial Co is expected to generate 2.36 times more return on investment than WooDeumGee Farm. However, Busan Industrial is 2.36 times more volatile than WooDeumGee Farm Co,. It trades about 0.08 of its potential returns per unit of risk. WooDeumGee Farm Co, is currently generating about -0.07 per unit of risk. If you would invest  5,073,078  in Busan Industrial Co on December 10, 2024 and sell it today you would earn a total of  2,076,922  from holding Busan Industrial Co or generate 40.94% 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.  WooDeumGee Farm Co,

Busan Industrial

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Busan Industrial Co are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Busan Industrial is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

WooDeumGee Farm Co,

Risk-Adjusted Performance

Very Weak

Compared to the overall equity markets, risk-adjusted returns on investments in WooDeumGee Farm Co, are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, WooDeumGee Farm 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 WooDeumGee Farm

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

The idea behind Busan Industrial Co and WooDeumGee Farm 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.