Correlation Between Korean Air and Aurora World
Can any of the company-specific risk be diversified away by investing in both Korean Air and Aurora World 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 Aurora World 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 Aurora World, you can compare the effects of market volatilities on Korean Air and Aurora World 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 Aurora World. Check out your portfolio center. Please also check ongoing floating volatility patterns of Korean Air and Aurora World.
Diversification Opportunities for Korean Air and Aurora World
0.36 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Korean and Aurora is 0.36. Overlapping area represents the amount of risk that can be diversified away by holding Korean Air Lines and Aurora World in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aurora World 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 Aurora World. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aurora World has no effect on the direction of Korean Air i.e., Korean Air and Aurora World go up and down completely randomly.
Pair Corralation between Korean Air and Aurora World
Assuming the 90 days trading horizon Korean Air Lines is expected to generate 1.11 times more return on investment than Aurora World. However, Korean Air is 1.11 times more volatile than Aurora World. It trades about 0.01 of its potential returns per unit of risk. Aurora World is currently generating about -0.03 per unit of risk. If you would invest 2,354,063 in Korean Air Lines on October 12, 2024 and sell it today you would lose (19,063) from holding Korean Air Lines or give up 0.81% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 99.74% |
| Values | Daily Returns |
Korean Air Lines vs. Aurora World
Performance |
| Timeline |
| Korean Air Lines |
| Aurora World |
Korean Air and Aurora World Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Korean Air and Aurora World
The main advantage of trading using opposite Korean Air and Aurora World positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Korean Air position performs unexpectedly, Aurora World 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 Aurora World will offset losses from the drop in Aurora World's long position.| Korean Air vs. Dongwoo Farm To | Korean Air vs. KEPCO Engineering Construction | Korean Air vs. GS Engineering Construction | Korean Air vs. Nam Hwa Construction |
| Aurora World vs. Seoul Semiconductor Co | Aurora World vs. Hotel Shilla Co | Aurora World vs. Echomarketing CoLtd | Aurora World vs. KCC Engineering Construction |
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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.
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