Correlation Between Korean Air and Namyang Dairy
Can any of the company-specific risk be diversified away by investing in both Korean Air and Namyang Dairy 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 Korean Air and Namyang Dairy into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Korean Air Lines and Namyang Dairy, you can compare the effects of market volatilities on Korean Air and Namyang Dairy 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 Korean Air with a short position of Namyang Dairy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Korean Air and Namyang Dairy.
Diversification Opportunities for Korean Air and Namyang Dairy
0.1 | Correlation Coefficient |
Average diversification
The 3 months correlation between Korean and Namyang is 0.1. Overlapping area represents the amount of risk that can be diversified away by holding Korean Air Lines and Namyang Dairy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Namyang Dairy and Korean Air 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 Korean Air Lines are associated (or correlated) with Namyang Dairy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Namyang Dairy has no effect on the direction of Korean Air i.e., Korean Air and Namyang Dairy go up and down completely randomly.
Pair Corralation between Korean Air and Namyang Dairy
Assuming the 90 days trading horizon Korean Air is expected to generate 127.81 times less return on investment than Namyang Dairy. But when comparing it to its historical volatility, Korean Air Lines is 66.06 times less risky than Namyang Dairy. It trades about 0.05 of its potential returns per unit of risk. Namyang Dairy is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest 5,160,000 in Namyang Dairy on September 24, 2024 and sell it today you would earn a total of 760,000 from holding Namyang Dairy or generate 14.73% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 99.38% |
| Values | Daily Returns |
Korean Air Lines vs. Namyang Dairy
Performance |
| Timeline |
| Korean Air Lines |
| Namyang Dairy |
Korean Air and Namyang Dairy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Korean Air and Namyang Dairy
The main advantage of trading using opposite Korean Air and Namyang Dairy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Korean Air position performs unexpectedly, Namyang Dairy 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 Namyang Dairy will offset losses from the drop in Namyang Dairy's long position.| Korean Air vs. LG Display Co | Korean Air vs. Woori Technology Investment | Korean Air vs. KTB Investment Securities | Korean Air vs. Korea Computer |
| Namyang Dairy vs. FoodNamoo | Namyang Dairy vs. Samlip General Foods | Namyang Dairy vs. Organic Special Pet | Namyang Dairy vs. FOODWELL Co |
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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.
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