Correlation Between BusinessOn Communication and Woorim Machinery

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

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

Diversification Opportunities for BusinessOn Communication and Woorim Machinery

-0.62

Correlation Coefficient

BusinessOn Communication  Woorim Machinery

Excellent diversification

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

Pair Corralation between BusinessOn Communication and Woorim Machinery

Assuming the 90 days trading horizon BusinessOn Communication Co is expected to generate 0.73 times more return on investment than Woorim Machinery. However, BusinessOn Communication Co is 1.38 times less risky than Woorim Machinery. It trades about 0.07 of its potential returns per unit of risk. Woorim Machinery Co is currently generating about 0.02 per unit of risk. If you would invest  1,260,000  in BusinessOn Communication Co on March 7, 2024 and sell it today you would earn a total of  127,000  from holding BusinessOn Communication Co or generate 10.08% return on investment over 90 days.

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

BusinessOn Communication Co  vs.  Woorim Machinery Co

BusinessOn Communication

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in BusinessOn Communication Co are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, BusinessOn Communication may actually be approaching a critical reversion point that can send shares even higher in July 2024.

Woorim Machinery

Risk-Adjusted Performance

1 of 100

Weak

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

Pair Trading with BusinessOn Communication and Woorim Machinery

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

The idea behind BusinessOn Communication Co and Woorim Machinery 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.

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 Dashboard module to portfolio dashboard that provides centralized access to all your investments.