Correlation Between Korean Air and Next Entertainment
Can any of the company-specific risk be diversified away by investing in both Korean Air and Next Entertainment 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 Next Entertainment 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 Next Entertainment World, you can compare the effects of market volatilities on Korean Air and Next Entertainment 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 Next Entertainment. Check out your portfolio center. Please also check ongoing floating volatility patterns of Korean Air and Next Entertainment.
Diversification Opportunities for Korean Air and Next Entertainment
-0.45 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Korean and Next is -0.45. Overlapping area represents the amount of risk that can be diversified away by holding Korean Air Lines and Next Entertainment World in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Next Entertainment 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 Next Entertainment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Next Entertainment World has no effect on the direction of Korean Air i.e., Korean Air and Next Entertainment go up and down completely randomly.
Pair Corralation between Korean Air and Next Entertainment
Assuming the 90 days trading horizon Korean Air Lines is expected to generate 0.52 times more return on investment than Next Entertainment. However, Korean Air Lines is 1.94 times less risky than Next Entertainment. It trades about 0.19 of its potential returns per unit of risk. Next Entertainment World is currently generating about 0.0 per unit of risk. If you would invest 2,370,000 in Korean Air Lines on August 28, 2024 and sell it today you would earn a total of 155,000 from holding Korean Air Lines or generate 6.54% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Korean Air Lines vs. Next Entertainment World
Performance |
| Timeline |
| Korean Air Lines |
| Next Entertainment World |
Korean Air and Next Entertainment Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Korean Air and Next Entertainment
The main advantage of trading using opposite Korean Air and Next Entertainment positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Korean Air position performs unexpectedly, Next Entertainment 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 Next Entertainment will offset losses from the drop in Next Entertainment's long position.| Korean Air vs. Samsung Electronics Co | Korean Air vs. Samsung Electronics Co | Korean Air vs. Hyundai Motor Co | Korean Air vs. Hyundai Motor |
| Next Entertainment vs. AfreecaTV Co | Next Entertainment vs. SS TECH | Next Entertainment vs. Busan Industrial Co | Next Entertainment vs. Busan Ind |
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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.
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