Correlation Between Wonbang Tech and Busan Ind

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

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

Diversification Opportunities for Wonbang Tech and Busan Ind

0.33

Correlation Coefficient

Wonbang Tech  Busan Ind

Weak diversification

The 3 months correlation between Wonbang and Busan is 0.33. Overlapping area represents the amount of risk that can be diversified away by holding Wonbang Tech Co and Busan Ind in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Busan Ind and Wonbang Tech 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 Wonbang Tech Co 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 Wonbang Tech i.e., Wonbang Tech and Busan Ind go up and down completely randomly.

Pair Corralation between Wonbang Tech and Busan Ind

Assuming the 90 days trading horizon Wonbang Tech Co is expected to generate 1.33 times more return on investment than Busan Ind. However, Wonbang Tech is 1.33 times more volatile than Busan Ind. It trades about 0.03 of its potential returns per unit of risk. Busan Ind is currently generating about 0.01 per unit of risk. If you would invest  1,036,942  in Wonbang Tech Co on December 11, 2024 and sell it today you would earn a total of  275,058  from holding Wonbang Tech Co or generate 26.53% return on investment over 90 days.

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

Wonbang Tech Co  vs.  Busan Ind

Wonbang Tech

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Wonbang Tech Co are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Wonbang Tech may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Busan Ind

Risk-Adjusted Performance

Very Weak

Over the last 90 days Busan Ind has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Busan Ind is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Wonbang Tech and Busan Ind

The main advantage of trading using opposite Wonbang Tech and Busan Ind positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Wonbang Tech 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 Wonbang Tech Co 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.

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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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.