Correlation Between Samsung KODEX and Busan Industrial

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

By analyzing existing cross correlation between Samsung KODEX 200 and Busan Industrial Co, you can compare the effects of market volatilities on Samsung KODEX 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 Samsung KODEX with a short position of Busan Industrial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Samsung KODEX and Busan Industrial.

Diversification Opportunities for Samsung KODEX and Busan Industrial

-0.58

Correlation Coefficient

Samsung KODEX  Busan Industrial

Excellent diversification

The 3 months correlation between Samsung and Busan is -0.58. Overlapping area represents the amount of risk that can be diversified away by holding Samsung KODEX 200 and Busan Industrial Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Busan Industrial and Samsung KODEX 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 Samsung KODEX 200 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 Samsung KODEX i.e., Samsung KODEX and Busan Industrial go up and down completely randomly.

Pair Corralation between Samsung KODEX and Busan Industrial

Assuming the 90 days trading horizon Samsung KODEX 200 is expected to under-perform the Busan Industrial. But the etf apears to be less risky and, when comparing its historical volatility, Samsung KODEX 200 is 5.27 times less risky than Busan Industrial. The etf trades about -0.04 of its potential returns per unit of risk. The Busan Industrial Co is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest  4,963,444  in Busan Industrial Co on October 10, 2024 and sell it today you would earn a total of  2,636,556  from holding Busan Industrial Co or generate 53.12% return on investment over 90 days.

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

Samsung KODEX 200  vs.  Busan Industrial Co

Samsung KODEX 200

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Samsung KODEX 200 has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Samsung KODEX 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

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 Samsung KODEX and Busan Industrial

The main advantage of trading using opposite Samsung KODEX and Busan Industrial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Samsung KODEX 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 Samsung KODEX 200 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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.