Correlation Between Busan Industrial and Korean Air
Can any of the company-specific risk be diversified away by investing in both Busan Industrial and Korean 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 Busan Industrial and Korean Air into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Busan Industrial Co and Korean Air Lines, you can compare the effects of market volatilities on Busan Industrial and Korean 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 Busan Industrial with a short position of Korean Air. Check out your portfolio center. Please also check ongoing floating volatility patterns of Busan Industrial and Korean Air.
Diversification Opportunities for Busan Industrial and Korean Air
-0.65 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Busan and Korean is -0.65. Overlapping area represents the amount of risk that can be diversified away by holding Busan Industrial Co and Korean Air Lines in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Korean Air Lines and Busan Industrial 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 Busan Industrial Co are associated (or correlated) with Korean Air. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Korean Air Lines has no effect on the direction of Busan Industrial i.e., Busan Industrial and Korean Air go up and down completely randomly.
Pair Corralation between Busan Industrial and Korean Air
Assuming the 90 days trading horizon Busan Industrial Co is expected to under-perform the Korean Air. In addition to that, Busan Industrial is 4.63 times more volatile than Korean Air Lines. It trades about -0.06 of its total potential returns per unit of risk. Korean Air Lines is currently generating about -0.03 per unit of volatility. If you would invest 2,265,000 in Korean Air Lines on November 8, 2024 and sell it today you would lose (10,000) from holding Korean Air Lines or give up 0.44% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 94.74% |
| Values | Daily Returns |
Busan Industrial Co vs. Korean Air Lines
Performance |
| Timeline |
| Busan Industrial |
| Korean Air Lines |
Busan Industrial and Korean Air Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Busan Industrial and Korean Air
The main advantage of trading using opposite Busan Industrial and Korean Air positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Busan Industrial position performs unexpectedly, Korean 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 Korean Air will offset losses from the drop in Korean Air's long position.| Busan Industrial vs. Duksan Hi Metal | Busan Industrial vs. Dongil Metal Co | Busan Industrial vs. Sejong Telecom | Busan Industrial vs. Digital Power Communications |
| Korean Air vs. KyungIn Electronics Co | Korean Air vs. Inzi Display CoLtd | Korean Air vs. Shinil Electronics Co | Korean Air vs. Korea Electronic Certification |
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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.
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