Correlation Between SEOJEON ELECTRIC and Busan Industrial

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

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

Diversification Opportunities for SEOJEON ELECTRIC and Busan Industrial

-0.52

Correlation Coefficient

SEOJEON ELECTRIC  Busan Industrial

Excellent diversification

The 3 months correlation between SEOJEON and Busan is -0.52. Overlapping area represents the amount of risk that can be diversified away by holding SEOJEON ELECTRIC MACHINERY and Busan Industrial Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Busan Industrial and SEOJEON ELECTRIC 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 SEOJEON ELECTRIC MACHINERY 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 SEOJEON ELECTRIC i.e., SEOJEON ELECTRIC and Busan Industrial go up and down completely randomly.

Pair Corralation between SEOJEON ELECTRIC and Busan Industrial

Assuming the 90 days trading horizon SEOJEON ELECTRIC MACHINERY is expected to under-perform the Busan Industrial. In addition to that, SEOJEON ELECTRIC is 1.29 times more volatile than Busan Industrial Co. It trades about -0.01 of its total potential returns per unit of risk. Busan Industrial Co is currently generating about 0.01 per unit of volatility. If you would invest  7,564,386  in Busan Industrial Co on September 29, 2024 and sell it today you would lose (54,386) from holding Busan Industrial Co or give up 0.72% of portfolio value over 90 days.

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

SEOJEON ELECTRIC MACHINERY  vs.  Busan Industrial Co

SEOJEON ELECTRIC MAC

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days SEOJEON ELECTRIC MACHINERY 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.

Busan Industrial

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Busan Industrial Co are ranked lower than 10 (%) 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 SEOJEON ELECTRIC and Busan Industrial

The main advantage of trading using opposite SEOJEON ELECTRIC and Busan Industrial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SEOJEON ELECTRIC 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 SEOJEON ELECTRIC MACHINERY 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.