Correlation Between Busan Industrial and DYPNF CoLtd

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

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

Diversification Opportunities for Busan Industrial and DYPNF CoLtd

-0.47

Correlation Coefficient

Busan Industrial  DYPNF CoLtd

Very good diversification

The 3 months correlation between Busan and DYPNF is -0.47. Overlapping area represents the amount of risk that can be diversified away by holding Busan Industrial Co and DYPNF CoLtd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on DYPNF CoLtd and Busan 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 Busan Industrial Co are associated (or correlated) with DYPNF CoLtd. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of DYPNF CoLtd has no effect on the direction of Busan Industrial i.e., Busan Industrial and DYPNF CoLtd go up and down completely randomly.

Pair Corralation between Busan Industrial and DYPNF CoLtd

Assuming the 90 days trading horizon Busan Industrial Co is expected to generate 1.52 times more return on investment than DYPNF CoLtd. However, Busan Industrial is 1.52 times more volatile than DYPNF CoLtd. It trades about 0.08 of its potential returns per unit of risk. DYPNF CoLtd is currently generating about 0.01 per unit of risk. If you would invest  5,190,000  in Busan Industrial Co on September 2, 2024 and sell it today you would earn a total of  950,000  from holding Busan Industrial Co or generate 18.3% return on investment over 90 days.

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

Busan Industrial Co  vs.  DYPNF CoLtd

Busan Industrial

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Busan Industrial Co are ranked lower than 5 (%) 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.

DYPNF CoLtd

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in DYPNF CoLtd are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, DYPNF CoLtd is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Busan Industrial and DYPNF CoLtd

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

The idea behind Busan Industrial Co and DYPNF CoLtd 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.