Correlation Between Korean Air and Kwang Jin
Can any of the company-specific risk be diversified away by investing in both Korean Air and Kwang Jin 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 Kwang Jin 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 Kwang Jin Ind, you can compare the effects of market volatilities on Korean Air and Kwang Jin 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 Kwang Jin. Check out your portfolio center. Please also check ongoing floating volatility patterns of Korean Air and Kwang Jin.
Diversification Opportunities for Korean Air and Kwang Jin
-0.68 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Korean and Kwang is -0.68. Overlapping area represents the amount of risk that can be diversified away by holding Korean Air Lines and Kwang Jin Ind in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kwang Jin Ind 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 Kwang Jin. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kwang Jin Ind has no effect on the direction of Korean Air i.e., Korean Air and Kwang Jin go up and down completely randomly.
Pair Corralation between Korean Air and Kwang Jin
Assuming the 90 days trading horizon Korean Air Lines is expected to generate 0.81 times more return on investment than Kwang Jin. However, Korean Air Lines is 1.24 times less risky than Kwang Jin. It trades about -0.02 of its potential returns per unit of risk. Kwang Jin Ind is currently generating about -0.12 per unit of risk. If you would invest 2,390,000 in Korean Air Lines on October 1, 2024 and sell it today you would lose (60,000) from holding Korean Air Lines or give up 2.51% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Korean Air Lines vs. Kwang Jin Ind
Performance |
| Timeline |
| Korean Air Lines |
| Kwang Jin Ind |
Korean Air and Kwang Jin Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Korean Air and Kwang Jin
The main advantage of trading using opposite Korean Air and Kwang Jin positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Korean Air position performs unexpectedly, Kwang Jin 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 Kwang Jin will offset losses from the drop in Kwang Jin's long position.| Korean Air vs. Busan Industrial Co | Korean Air vs. Busan Ind | Korean Air vs. Mirae Asset Daewoo | Korean Air vs. Shinhan WTI Futures |
| Kwang Jin vs. Seoul Food Industrial | Kwang Jin vs. Daiyang Metal Co | Kwang Jin vs. LEENO Industrial | Kwang Jin vs. BGF Retail 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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..
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