Correlation Between Korean Air and Automobile
Can any of the company-specific risk be diversified away by investing in both Korean Air and Automobile 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 Automobile 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 Automobile Pc, you can compare the effects of market volatilities on Korean Air and Automobile 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 Automobile. Check out your portfolio center. Please also check ongoing floating volatility patterns of Korean Air and Automobile.
Diversification Opportunities for Korean Air and Automobile
-0.22 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Korean and Automobile is -0.22. Overlapping area represents the amount of risk that can be diversified away by holding Korean Air Lines and Automobile Pc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Automobile Pc 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 Automobile. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Automobile Pc has no effect on the direction of Korean Air i.e., Korean Air and Automobile go up and down completely randomly.
Pair Corralation between Korean Air and Automobile
Assuming the 90 days trading horizon Korean Air Lines is expected to generate 0.35 times more return on investment than Automobile. However, Korean Air Lines is 2.87 times less risky than Automobile. It trades about 0.24 of its potential returns per unit of risk. Automobile Pc is currently generating about 0.0 per unit of risk. If you would invest 2,390,000 in Korean Air Lines on September 1, 2024 and sell it today you would earn a total of 205,000 from holding Korean Air Lines or generate 8.58% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Against |
Strength | Insignificant |
Accuracy | 100.0% |
Values | Daily Returns |
Korean Air Lines vs. Automobile Pc
Performance |
Timeline |
Korean Air Lines |
Automobile Pc |
Korean Air and Automobile Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Korean Air and Automobile
The main advantage of trading using opposite Korean Air and Automobile positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Korean Air position performs unexpectedly, Automobile 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 Automobile will offset losses from the drop in Automobile's long position.Korean Air vs. Korea New Network | Korean Air vs. ICD Co | Korean Air vs. DYPNF CoLtd | Korean Air vs. Busan Industrial Co |
Automobile vs. Miwon Chemical | Automobile vs. Sung Bo Chemicals | Automobile vs. Chin Yang Chemical | Automobile vs. Daehan Synthetic Fiber |
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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.
Other Complementary Tools
Sectors List of equity sectors categorizing publicly traded companies based on their primary business activities | |
ETF Categories List of ETF categories grouped based on various criteria, such as the investment strategy or type of investments | |
Global Correlations Find global opportunities by holding instruments from different markets | |
Portfolio Backtesting Avoid under-diversification and over-optimization by backtesting your portfolios | |
Portfolio Diagnostics Use generated alerts and portfolio events aggregator to diagnose current holdings |