Correlation Between Daesung Industrial and Busan Industrial

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

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

Diversification Opportunities for Daesung Industrial and Busan Industrial

-0.44

Correlation Coefficient

Daesung Industrial  Busan Industrial

Very good diversification

The 3 months correlation between Daesung and Busan is -0.44. Overlapping area represents the amount of risk that can be diversified away by holding Daesung Industrial 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 Daesung Industrial 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 Daesung Industrial 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 Daesung Industrial i.e., Daesung Industrial and Busan Industrial go up and down completely randomly.

Pair Corralation between Daesung Industrial and Busan Industrial

Assuming the 90 days trading horizon Daesung Industrial Co is expected to under-perform the Busan Industrial. But the stock apears to be less risky and, when comparing its historical volatility, Daesung Industrial Co is 2.69 times less risky than Busan Industrial. The stock trades about -0.06 of its potential returns per unit of risk. The Busan Industrial Co is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest  4,893,677  in Busan Industrial Co on October 8, 2024 and sell it today you would earn a total of  2,896,323  from holding Busan Industrial Co or generate 59.19% return on investment over 90 days.

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

Daesung Industrial Co  vs.  Busan Industrial Co

Daesung Industrial

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Daesung 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.

Busan Industrial

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Busan Industrial Co are ranked lower than 11 (%) 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 Daesung Industrial and Busan Industrial

The main advantage of trading using opposite Daesung Industrial and Busan Industrial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Daesung Industrial 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 Daesung Industrial 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.