Correlation Between Dongbang Ship and BNK Financial

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

By analyzing existing cross correlation between Dongbang Ship Machinery and BNK Financial Group, you can compare the effects of market volatilities on Dongbang Ship 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 Dongbang Ship with a short position of BNK Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dongbang Ship and BNK Financial.

Diversification Opportunities for Dongbang Ship and BNK Financial

0.25

Correlation Coefficient

Dongbang Ship  BNK Financial

Modest diversification

The 3 months correlation between Dongbang and BNK is 0.25. Overlapping area represents the amount of risk that can be diversified away by holding Dongbang Ship Machinery 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 Dongbang Ship 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 Dongbang Ship Machinery 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 Dongbang Ship i.e., Dongbang Ship and BNK Financial go up and down completely randomly.

Pair Corralation between Dongbang Ship and BNK Financial

Assuming the 90 days trading horizon Dongbang Ship is expected to generate 4.32 times less return on investment than BNK Financial. In addition to that, Dongbang Ship is 1.55 times more volatile than BNK Financial Group. It trades about 0.06 of its total potential returns per unit of risk. BNK Financial Group is currently generating about 0.38 per unit of volatility. If you would invest  1,059,000  in BNK Financial Group on October 26, 2024 and sell it today you would earn a total of  132,000  from holding BNK Financial Group or generate 12.46% return on investment over 90 days.

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

Dongbang Ship Machinery  vs.  BNK Financial Group

Dongbang Ship Machinery

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Dongbang Ship Machinery are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Dongbang Ship may actually be approaching a critical reversion point that can send shares even higher in February 2025.

BNK Financial Group

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in BNK Financial Group are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, BNK Financial sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Dongbang Ship and BNK Financial

The main advantage of trading using opposite Dongbang Ship and BNK Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dongbang Ship 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.

The idea behind Dongbang Ship Machinery and BNK Financial Group 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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.