Correlation Between Korean Air and Hanshin Construction
Can any of the company-specific risk be diversified away by investing in both Korean Air and Hanshin Construction 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 Hanshin Construction 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 Hanshin Construction Co, you can compare the effects of market volatilities on Korean Air and Hanshin Construction 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 Hanshin Construction. Check out your portfolio center. Please also check ongoing floating volatility patterns of Korean Air and Hanshin Construction.
Diversification Opportunities for Korean Air and Hanshin Construction
0.21 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Korean and Hanshin is 0.21. Overlapping area represents the amount of risk that can be diversified away by holding Korean Air Lines and Hanshin Construction Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hanshin Construction 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 Hanshin Construction. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hanshin Construction has no effect on the direction of Korean Air i.e., Korean Air and Hanshin Construction go up and down completely randomly.
Pair Corralation between Korean Air and Hanshin Construction
Assuming the 90 days trading horizon Korean Air Lines is expected to under-perform the Hanshin Construction. In addition to that, Korean Air is 1.3 times more volatile than Hanshin Construction Co. It trades about -0.2 of its total potential returns per unit of risk. Hanshin Construction Co is currently generating about -0.1 per unit of volatility. If you would invest 666,680 in Hanshin Construction Co on October 17, 2024 and sell it today you would lose (18,680) from holding Hanshin Construction Co or give up 2.8% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 95.0% |
| Values | Daily Returns |
Korean Air Lines vs. Hanshin Construction Co
Performance |
| Timeline |
| Korean Air Lines |
| Hanshin Construction |
Korean Air and Hanshin Construction Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Korean Air and Hanshin Construction
The main advantage of trading using opposite Korean Air and Hanshin Construction positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Korean Air position performs unexpectedly, Hanshin Construction 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 Hanshin Construction will offset losses from the drop in Hanshin Construction's long position.| Korean Air vs. NH Investment Securities | Korean Air vs. DB Financial Investment | Korean Air vs. BGF Retail Co | Korean Air vs. Tae Kyung Chemical |
| Hanshin Construction vs. Hankook Steel Co | Hanshin Construction vs. Korea Steel Co | Hanshin Construction vs. Jeju Beer Co | Hanshin Construction vs. Fine Besteel 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 Commodity Directory module to find actively traded commodities issued by global exchanges.
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