Correlation Between Korea Air and Formetal
Can any of the company-specific risk be diversified away by investing in both Korea Air and Formetal 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 Korea Air and Formetal into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Korea Air Svc and Formetal Co, you can compare the effects of market volatilities on Korea Air and Formetal 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 Korea Air with a short position of Formetal. Check out your portfolio center. Please also check ongoing floating volatility patterns of Korea Air and Formetal.
Diversification Opportunities for Korea Air and Formetal
Very weak diversification
The 3 months correlation between Korea and Formetal is 0.51. Overlapping area represents the amount of risk that can be diversified away by holding Korea Air Svc and Formetal Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Formetal and Korea 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 Korea Air Svc are associated (or correlated) with Formetal. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Formetal has no effect on the direction of Korea Air i.e., Korea Air and Formetal go up and down completely randomly.
Pair Corralation between Korea Air and Formetal
Assuming the 90 days trading horizon Korea Air Svc is expected to generate 1.15 times more return on investment than Formetal. However, Korea Air is 1.15 times more volatile than Formetal Co. It trades about 0.03 of its potential returns per unit of risk. Formetal Co is currently generating about -0.03 per unit of risk. If you would invest 4,523,145 in Korea Air Svc on September 1, 2024 and sell it today you would earn a total of 1,046,855 from holding Korea Air Svc or generate 23.14% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Korea Air Svc vs. Formetal Co
Performance |
| Timeline |
| Korea Air Svc |
| Formetal |
Korea Air and Formetal Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Korea Air and Formetal
The main advantage of trading using opposite Korea Air and Formetal positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Korea Air position performs unexpectedly, Formetal 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 Formetal will offset losses from the drop in Formetal's long position.| Korea Air vs. Korea New Network | Korea Air vs. ICD Co | Korea Air vs. DYPNF CoLtd | Korea Air vs. Busan Industrial Co |
| Formetal vs. COWINTECH Co | Formetal vs. Young Poong Precision | Formetal vs. Seoam Machinery Industry | Formetal vs. Haisung TPC 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.
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