Correlation Between Jeju Beer and Bookook Steel

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

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

Diversification Opportunities for Jeju Beer and Bookook Steel

-0.62

Correlation Coefficient

Jeju Beer  Bookook Steel

Excellent diversification

The 3 months correlation between Jeju and Bookook is -0.62. Overlapping area represents the amount of risk that can be diversified away by holding Jeju Beer Co and Bookook Steel in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bookook Steel and Jeju Beer 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 Jeju Beer Co are associated (or correlated) with Bookook Steel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bookook Steel has no effect on the direction of Jeju Beer i.e., Jeju Beer and Bookook Steel go up and down completely randomly.

Pair Corralation between Jeju Beer and Bookook Steel

Assuming the 90 days trading horizon Jeju Beer Co is expected to under-perform the Bookook Steel. In addition to that, Jeju Beer is 1.68 times more volatile than Bookook Steel. It trades about -0.07 of its total potential returns per unit of risk. Bookook Steel is currently generating about 0.08 per unit of volatility. If you would invest  230,860  in Bookook Steel on November 29, 2024 and sell it today you would earn a total of  22,140  from holding Bookook Steel or generate 9.59% return on investment over 90 days.

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

Jeju Beer Co  vs.  Bookook Steel

Jeju Beer

Risk-Adjusted Performance

Very Weak

Over the last 90 days Jeju Beer Co 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 March 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Bookook Steel

Risk-Adjusted Performance

Modest

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

Pair Trading with Jeju Beer and Bookook Steel

The main advantage of trading using opposite Jeju Beer and Bookook Steel positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Jeju Beer position performs unexpectedly, Bookook Steel 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 Bookook Steel will offset losses from the drop in Bookook Steel's long position.

The idea behind Jeju Beer Co and Bookook Steel 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.