Correlation Between Celltrion and Busan Industrial

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

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

Diversification Opportunities for Celltrion and Busan Industrial

-0.11

Correlation Coefficient

Celltrion  Busan Industrial

Good diversification

The 3 months correlation between Celltrion and Busan is -0.11. Overlapping area represents the amount of risk that can be diversified away by holding Celltrion and Busan Industrial Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Busan Industrial and Celltrion 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 Celltrion 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 Celltrion i.e., Celltrion and Busan Industrial go up and down completely randomly.

Pair Corralation between Celltrion and Busan Industrial

Assuming the 90 days trading horizon Celltrion is expected to generate 0.74 times more return on investment than Busan Industrial. However, Celltrion is 1.35 times less risky than Busan Industrial. It trades about 0.03 of its potential returns per unit of risk. Busan Industrial Co is currently generating about 0.02 per unit of risk. If you would invest  16,256,800  in Celltrion on September 26, 2024 and sell it today you would earn a total of  3,183,200  from holding Celltrion or generate 19.58% return on investment over 90 days.

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

Celltrion  vs.  Busan Industrial Co

Celltrion

Risk-Adjusted Performance

0 of 100

Very Weak

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

Busan Industrial

Risk-Adjusted Performance

10 of 100

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 Celltrion and Busan Industrial

The main advantage of trading using opposite Celltrion and Busan Industrial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Celltrion 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 Celltrion 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.