Correlation Between Korean Air and Tway Air
Can any of the company-specific risk be diversified away by investing in both Korean Air and Tway Air 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 Tway Air 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 Tway Air Co, you can compare the effects of market volatilities on Korean Air and Tway Air 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 Tway Air. Check out your portfolio center. Please also check ongoing floating volatility patterns of Korean Air and Tway Air.
Diversification Opportunities for Korean Air and Tway Air
-0.05 | Correlation Coefficient |
Good diversification
The 3 months correlation between Korean and Tway is -0.05. Overlapping area represents the amount of risk that can be diversified away by holding Korean Air Lines and Tway Air Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tway Air 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 Tway Air. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tway Air has no effect on the direction of Korean Air i.e., Korean Air and Tway Air go up and down completely randomly.
Pair Corralation between Korean Air and Tway Air
Assuming the 90 days trading horizon Korean Air Lines is expected to under-perform the Tway Air. But the stock apears to be less risky and, when comparing its historical volatility, Korean Air Lines is 2.86 times less risky than Tway Air. The stock trades about -0.01 of its potential returns per unit of risk. The Tway Air Co is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest 216,500 in Tway Air Co on September 26, 2024 and sell it today you would earn a total of 34,000 from holding Tway Air Co or generate 15.7% 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. Tway Air Co
Performance |
| Timeline |
| Korean Air Lines |
| Tway Air |
Korean Air and Tway Air Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Korean Air and Tway Air
The main advantage of trading using opposite Korean Air and Tway Air positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Korean Air position performs unexpectedly, Tway Air 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 Tway Air will offset losses from the drop in Tway Air's long position.| Korean Air vs. Pyung Hwa Industrial | Korean Air vs. LEENO Industrial | Korean Air vs. Formetal Co | Korean Air vs. Youngsin Metal Industrial |
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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.
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