Correlation Between Busan Ind and Hankook Steel
Can any of the company-specific risk be diversified away by investing in both Busan Ind and Hankook 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 Busan Ind and Hankook Steel into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Busan Ind and Hankook Steel Co, you can compare the effects of market volatilities on Busan Ind and Hankook 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 Busan Ind with a short position of Hankook Steel. Check out your portfolio center. Please also check ongoing floating volatility patterns of Busan Ind and Hankook Steel.
Diversification Opportunities for Busan Ind and Hankook Steel
0.18 | Correlation Coefficient |
Average diversification
The 3 months correlation between Busan and Hankook is 0.18. Overlapping area represents the amount of risk that can be diversified away by holding Busan Ind and Hankook Steel Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hankook Steel and Busan Ind 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 Busan Ind are associated (or correlated) with Hankook Steel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hankook Steel has no effect on the direction of Busan Ind i.e., Busan Ind and Hankook Steel go up and down completely randomly.
Pair Corralation between Busan Ind and Hankook Steel
Assuming the 90 days trading horizon Busan Ind is expected to generate 1.2 times more return on investment than Hankook Steel. However, Busan Ind is 1.2 times more volatile than Hankook Steel Co. It trades about 0.2 of its potential returns per unit of risk. Hankook Steel Co is currently generating about 0.01 per unit of risk. If you would invest 5,630,000 in Busan Ind on September 26, 2024 and sell it today you would earn a total of 2,090,000 from holding Busan Ind or generate 37.12% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Insignificant |
Accuracy | 100.0% |
Values | Daily Returns |
Busan Ind vs. Hankook Steel Co
Performance |
Timeline |
Busan Ind |
Hankook Steel |
Busan Ind and Hankook Steel Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Busan Ind and Hankook Steel
The main advantage of trading using opposite Busan Ind and Hankook Steel positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Busan Ind position performs unexpectedly, Hankook 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 Hankook Steel will offset losses from the drop in Hankook Steel's long position.Busan Ind vs. Woorim Machinery Co | Busan Ind vs. CU Medical Systems | Busan Ind vs. Hyundai Engineering Construction | Busan Ind vs. Seoul Food Industrial |
Hankook Steel vs. AptaBio Therapeutics | Hankook Steel vs. Wonbang Tech Co | Hankook Steel vs. Busan Industrial Co | Hankook Steel vs. Busan Ind |
Check out your portfolio center.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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.
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