Correlation Between Busan Industrial and KODEX Metaverse

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

Diversification Opportunities for Busan Industrial and KODEX Metaverse

0.84

Correlation Coefficient

Busan Industrial  KODEX Metaverse

Very poor diversification

The 3 months correlation between Busan and KODEX is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding Busan Industrial Co and KODEX Metaverse Nasdaq in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on KODEX Metaverse Nasdaq 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 KODEX Metaverse. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of KODEX Metaverse Nasdaq has no effect on the direction of Busan Industrial i.e., Busan Industrial and KODEX Metaverse go up and down completely randomly.

Pair Corralation between Busan Industrial and KODEX Metaverse

Assuming the 90 days trading horizon Busan Industrial is expected to generate 4.25 times less return on investment than KODEX Metaverse. In addition to that, Busan Industrial is 1.93 times more volatile than KODEX Metaverse Nasdaq. It trades about 0.02 of its total potential returns per unit of risk. KODEX Metaverse Nasdaq is currently generating about 0.14 per unit of volatility. If you would invest  581,500  in KODEX Metaverse Nasdaq on October 10, 2024 and sell it today you would earn a total of  999,500  from holding KODEX Metaverse Nasdaq or generate 171.88% return on investment over 90 days.

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

Busan Industrial Co  vs.  KODEX Metaverse Nasdaq

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.

KODEX Metaverse Nasdaq

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in KODEX Metaverse Nasdaq are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, KODEX Metaverse sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Busan Industrial and KODEX Metaverse

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

The idea behind Busan Industrial Co and KODEX Metaverse Nasdaq 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.