Correlation Between Korean Air and Hyosung Heavy
Can any of the company-specific risk be diversified away by investing in both Korean Air and Hyosung Heavy 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 Hyosung Heavy 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 Hyosung Heavy Industries, you can compare the effects of market volatilities on Korean Air and Hyosung Heavy 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 Hyosung Heavy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Korean Air and Hyosung Heavy.
Diversification Opportunities for Korean Air and Hyosung Heavy
0.68 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Korean and Hyosung is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding Korean Air Lines and Hyosung Heavy Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hyosung Heavy Industries 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 Hyosung Heavy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hyosung Heavy Industries has no effect on the direction of Korean Air i.e., Korean Air and Hyosung Heavy go up and down completely randomly.
Pair Corralation between Korean Air and Hyosung Heavy
Assuming the 90 days trading horizon Korean Air is expected to generate 13.02 times less return on investment than Hyosung Heavy. But when comparing it to its historical volatility, Korean Air Lines is 3.07 times less risky than Hyosung Heavy. It trades about 0.03 of its potential returns per unit of risk. Hyosung Heavy Industries is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest 6,705,680 in Hyosung Heavy Industries on September 1, 2024 and sell it today you would earn a total of 33,644,320 from holding Hyosung Heavy Industries or generate 501.73% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 99.77% |
| Values | Daily Returns |
Korean Air Lines vs. Hyosung Heavy Industries
Performance |
| Timeline |
| Korean Air Lines |
| Hyosung Heavy Industries |
Korean Air and Hyosung Heavy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Korean Air and Hyosung Heavy
The main advantage of trading using opposite Korean Air and Hyosung Heavy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Korean Air position performs unexpectedly, Hyosung Heavy 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 Hyosung Heavy will offset losses from the drop in Hyosung Heavy'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 |
| Hyosung Heavy vs. LG Energy Solution | Hyosung Heavy vs. Doosan Heavy Ind | Hyosung Heavy vs. Aprogen KIC | Hyosung Heavy vs. SNTEnergy 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.
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