Correlation Between Busan Industrial and KBSTAR Short

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

Diversification Opportunities for Busan Industrial and KBSTAR Short

0.88

Correlation Coefficient

Busan Industrial  KBSTAR Short

Very poor diversification

The 3 months correlation between Busan and KBSTAR is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding Busan Industrial Co and KBSTAR Short Term IG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on KBSTAR Short Term 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 KBSTAR Short. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of KBSTAR Short Term has no effect on the direction of Busan Industrial i.e., Busan Industrial and KBSTAR Short go up and down completely randomly.

Pair Corralation between Busan Industrial and KBSTAR Short

Assuming the 90 days trading horizon Busan Industrial Co is expected to generate 13.81 times more return on investment than KBSTAR Short. However, Busan Industrial is 13.81 times more volatile than KBSTAR Short Term IG. It trades about 0.15 of its potential returns per unit of risk. KBSTAR Short Term IG is currently generating about 0.27 per unit of risk. If you would invest  4,963,444  in Busan Industrial Co on October 10, 2024 and sell it today you would earn a total of  2,826,556  from holding Busan Industrial Co or generate 56.95% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	98.39%
Values	Daily Returns

Busan Industrial Co  vs.  KBSTAR Short Term IG

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.

KBSTAR Short Term

Risk-Adjusted Performance

21 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in KBSTAR Short Term IG are ranked lower than 21 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, KBSTAR Short may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Busan Industrial and KBSTAR Short

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

The idea behind Busan Industrial Co and KBSTAR Short Term IG 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.