Correlation Between ICD and Busan Industrial

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

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

Diversification Opportunities for ICD and Busan Industrial

0.37

Correlation Coefficient

ICD  Busan Industrial

Weak diversification

The 3 months correlation between ICD and Busan is 0.37. Overlapping area represents the amount of risk that can be diversified away by holding ICD Co and Busan Industrial Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Busan Industrial and ICD 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 ICD Co 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 ICD i.e., ICD and Busan Industrial go up and down completely randomly.

Pair Corralation between ICD and Busan Industrial

Assuming the 90 days trading horizon ICD is expected to generate 1.02 times less return on investment than Busan Industrial. In addition to that, ICD is 1.35 times more volatile than Busan Industrial Co. It trades about 0.09 of its total potential returns per unit of risk. Busan Industrial Co is currently generating about 0.13 per unit of volatility. If you would invest  6,119,588  in Busan Industrial Co on November 29, 2024 and sell it today you would earn a total of  1,710,412  from holding Busan Industrial Co or generate 27.95% return on investment over 90 days.

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

ICD Co  vs.  Busan Industrial Co

ICD Co

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in ICD Co are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, ICD sustained solid returns over the last few months and may actually be approaching a breakup point.

Busan Industrial

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Busan Industrial Co are ranked lower than 10 (%) 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.

Pair Trading with ICD and Busan Industrial

The main advantage of trading using opposite ICD and Busan Industrial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ICD 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 ICD Co 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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.