Correlation Between Shinsung Delta and Busan Industrial

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

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

Diversification Opportunities for Shinsung Delta and Busan Industrial

0.45

Correlation Coefficient

Shinsung Delta  Busan Industrial

Very weak diversification

The 3 months correlation between Shinsung and Busan is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding Shinsung Delta Tech and Busan Industrial Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Busan Industrial and Shinsung Delta 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 Shinsung Delta Tech 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 Shinsung Delta i.e., Shinsung Delta and Busan Industrial go up and down completely randomly.

Pair Corralation between Shinsung Delta and Busan Industrial

Assuming the 90 days trading horizon Shinsung Delta Tech is expected to under-perform the Busan Industrial. In addition to that, Shinsung Delta is 1.5 times more volatile than Busan Industrial Co. It trades about -0.28 of its total potential returns per unit of risk. Busan Industrial Co is currently generating about -0.07 per unit of volatility. If you would invest  7,495,000  in Busan Industrial Co on December 26, 2024 and sell it today you would lose (805,000) from holding Busan Industrial Co or give up 10.74% of portfolio value over 90 days.

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

Shinsung Delta Tech  vs.  Busan Industrial Co

Shinsung Delta Tech

Risk-Adjusted Performance

Very Weak

Over the last 90 days Shinsung Delta Tech has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Busan Industrial

Risk-Adjusted Performance

Very Weak

Over the last 90 days Busan Industrial Co has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Shinsung Delta and Busan Industrial

The main advantage of trading using opposite Shinsung Delta and Busan Industrial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Shinsung Delta 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 Shinsung Delta Tech 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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.