Correlation Between Busan Industrial and Shinhan Inverse

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

Diversification Opportunities for Busan Industrial and Shinhan Inverse

0.47

Correlation Coefficient

Busan Industrial  Shinhan Inverse

Very weak diversification

The 3 months correlation between Busan and Shinhan is 0.47. Overlapping area represents the amount of risk that can be diversified away by holding Busan Industrial Co and Shinhan Inverse Silver in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shinhan Inverse Silver 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 Shinhan Inverse. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shinhan Inverse Silver has no effect on the direction of Busan Industrial i.e., Busan Industrial and Shinhan Inverse go up and down completely randomly.

Pair Corralation between Busan Industrial and Shinhan Inverse

Assuming the 90 days trading horizon Busan Industrial Co is expected to generate 1.56 times more return on investment than Shinhan Inverse. However, Busan Industrial is 1.56 times more volatile than Shinhan Inverse Silver. It trades about -0.05 of its potential returns per unit of risk. Shinhan Inverse Silver is currently generating about -0.1 per unit of risk. If you would invest  7,495,000  in Busan Industrial Co on December 25, 2024 and sell it today you would lose (655,000) from holding Busan Industrial Co or give up 8.74% of portfolio value over 90 days.

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

Busan Industrial Co  vs.  Shinhan Inverse Silver

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.

Shinhan Inverse Silver

Risk-Adjusted Performance

Very Weak

Over the last 90 days Shinhan Inverse Silver 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.

Pair Trading with Busan Industrial and Shinhan Inverse

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

The idea behind Busan Industrial Co and Shinhan Inverse Silver 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.