Correlation Between SBI Investment and Busan Ind

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Can any of the company-specific risk be diversified away by investing in both SBI Investment and Busan Ind 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 SBI Investment and Busan Ind into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between SBI Investment KOREA and Busan Ind, you can compare the effects of market volatilities on SBI Investment and Busan Ind 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 SBI Investment with a short position of Busan Ind. Check out your portfolio center. Please also check ongoing floating volatility patterns of SBI Investment and Busan Ind.

Diversification Opportunities for SBI Investment and Busan Ind

0.69
  Correlation Coefficient

Poor diversification

The 3 months correlation between SBI and Busan is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding SBI Investment KOREA and Busan Ind in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Busan Ind and SBI Investment 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 SBI Investment KOREA are associated (or correlated) with Busan Ind. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Busan Ind has no effect on the direction of SBI Investment i.e., SBI Investment and Busan Ind go up and down completely randomly.

Pair Corralation between SBI Investment and Busan Ind

Assuming the 90 days trading horizon SBI Investment is expected to generate 3.49 times less return on investment than Busan Ind. But when comparing it to its historical volatility, SBI Investment KOREA is 1.61 times less risky than Busan Ind. It trades about 0.07 of its potential returns per unit of risk. Busan Ind is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest  4,910,000  in Busan Ind on October 7, 2024 and sell it today you would earn a total of  2,880,000  from holding Busan Ind or generate 58.66% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy100.0%
ValuesDaily Returns

SBI Investment KOREA  vs.  Busan Ind

 Performance 
       Timeline  
SBI Investment KOREA 

Risk-Adjusted Performance

5 of 100

 
Weak
 
Strong
Modest
Compared to the overall equity markets, risk-adjusted returns on investments in SBI Investment KOREA are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, SBI Investment sustained solid returns over the last few months and may actually be approaching a breakup point.
Busan Ind 

Risk-Adjusted Performance

11 of 100

 
Weak
 
Strong
Good
Compared to the overall equity markets, risk-adjusted returns on investments in Busan Ind are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Busan Ind sustained solid returns over the last few months and may actually be approaching a breakup point.

SBI Investment and Busan Ind Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with SBI Investment and Busan Ind

The main advantage of trading using opposite SBI Investment and Busan Ind positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SBI Investment position performs unexpectedly, Busan Ind 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 Ind will offset losses from the drop in Busan Ind's long position.
The idea behind SBI Investment KOREA and Busan Ind 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.
Check out your portfolio center.
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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.

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