Correlation Between Korea Ratings and BNK Financial
Can any of the company-specific risk be diversified away by investing in both Korea Ratings and BNK Financial 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 Korea Ratings and BNK Financial into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Korea Ratings Co and BNK Financial Group, you can compare the effects of market volatilities on Korea Ratings and BNK Financial 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 Korea Ratings with a short position of BNK Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Korea Ratings and BNK Financial.
Diversification Opportunities for Korea Ratings and BNK Financial
0.7 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Korea and BNK is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding Korea Ratings Co and BNK Financial Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BNK Financial Group and Korea Ratings 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 Korea Ratings Co are associated (or correlated) with BNK Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BNK Financial Group has no effect on the direction of Korea Ratings i.e., Korea Ratings and BNK Financial go up and down completely randomly.
Pair Corralation between Korea Ratings and BNK Financial
Assuming the 90 days trading horizon Korea Ratings is expected to generate 3.55 times less return on investment than BNK Financial. But when comparing it to its historical volatility, Korea Ratings Co is 3.52 times less risky than BNK Financial. It trades about 0.1 of its potential returns per unit of risk. BNK Financial Group is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest 975,000 in BNK Financial Group on September 13, 2024 and sell it today you would earn a total of 120,000 from holding BNK Financial Group or generate 12.31% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Significant |
Accuracy | 100.0% |
Values | Daily Returns |
Korea Ratings Co vs. BNK Financial Group
Performance |
Timeline |
Korea Ratings |
BNK Financial Group |
Korea Ratings and BNK Financial Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Korea Ratings and BNK Financial
The main advantage of trading using opposite Korea Ratings and BNK Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Korea Ratings position performs unexpectedly, BNK Financial 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 BNK Financial will offset losses from the drop in BNK Financial's long position.Korea Ratings vs. DB Financial Investment | Korea Ratings vs. Daelim Trading Co | Korea Ratings vs. Finebesteel | Korea Ratings vs. E Investment Development |
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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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.
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