Correlation Between Keyang Electric and Busan Industrial

Can any of the company-specific risk be diversified away by investing in both Keyang Electric and Busan Industrial 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 Keyang Electric and Busan Industrial into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Keyang Electric Machinery and Busan Industrial Co, you can compare the effects of market volatilities on Keyang Electric and Busan Industrial 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 Keyang Electric with a short position of Busan Industrial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Keyang Electric and Busan Industrial.

Diversification Opportunities for Keyang Electric and Busan Industrial

0.34

Correlation Coefficient

Keyang Electric  Busan Industrial

Weak diversification

The 3 months correlation between Keyang and Busan is 0.34. Overlapping area represents the amount of risk that can be diversified away by holding Keyang Electric Machinery and Busan Industrial Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Busan Industrial and Keyang Electric 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 Keyang Electric Machinery are associated (or correlated) with Busan Industrial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Busan Industrial has no effect on the direction of Keyang Electric i.e., Keyang Electric and Busan Industrial go up and down completely randomly.

Pair Corralation between Keyang Electric and Busan Industrial

Assuming the 90 days trading horizon Keyang Electric Machinery is expected to generate 0.61 times more return on investment than Busan Industrial. However, Keyang Electric Machinery is 1.63 times less risky than Busan Industrial. It trades about 0.04 of its potential returns per unit of risk. Busan Industrial Co is currently generating about 0.01 per unit of risk. If you would invest  329,500  in Keyang Electric Machinery on December 10, 2024 and sell it today you would earn a total of  12,500  from holding Keyang Electric Machinery or generate 3.79% return on investment over 90 days.

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

Keyang Electric Machinery  vs.  Busan Industrial Co

Keyang Electric Mach

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Keyang Electric Machinery are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Keyang Electric is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

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.

Pair Trading with Keyang Electric and Busan Industrial

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

The idea behind Keyang Electric Machinery and Busan Industrial 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.