Correlation Between Busan Ind and Poongsan

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

By analyzing existing cross correlation between Busan Ind and Poongsan, you can compare the effects of market volatilities on Busan Ind and Poongsan 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 Poongsan. Check out your portfolio center. Please also check ongoing floating volatility patterns of Busan Ind and Poongsan.

Diversification Opportunities for Busan Ind and Poongsan

-0.62

Correlation Coefficient

Busan Ind  Poongsan

Excellent diversification

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

Pair Corralation between Busan Ind and Poongsan

Assuming the 90 days trading horizon Busan Ind is expected to generate 2.45 times more return on investment than Poongsan. However, Busan Ind is 2.45 times more volatile than Poongsan. It trades about 0.23 of its potential returns per unit of risk. Poongsan is currently generating about -0.14 per unit of risk. If you would invest  5,500,000  in Busan Ind on September 23, 2024 and sell it today you would earn a total of  2,360,000  from holding Busan Ind or generate 42.91% return on investment over 90 days.

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

Busan Ind  vs.  Poongsan

Busan Ind

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Busan Ind are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Busan Ind sustained solid returns over the last few months and may actually be approaching a breakup point.

Poongsan

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Poongsan 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.

Pair Trading with Busan Ind and Poongsan

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

The idea behind Busan Ind and Poongsan 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.