Correlation Between Polaris Office and Korean Air
Can any of the company-specific risk be diversified away by investing in both Polaris Office 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 Polaris Office and Korean Air into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Polaris Office Corp and Korean Air Lines, you can compare the effects of market volatilities on Polaris Office 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 Polaris Office with a short position of Korean Air. Check out your portfolio center. Please also check ongoing floating volatility patterns of Polaris Office and Korean Air.
Diversification Opportunities for Polaris Office and Korean Air
0.22 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Polaris and Korean is 0.22. Overlapping area represents the amount of risk that can be diversified away by holding Polaris Office Corp 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 Polaris Office 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 Polaris Office Corp 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 Polaris Office i.e., Polaris Office and Korean Air go up and down completely randomly.
Pair Corralation between Polaris Office and Korean Air
Assuming the 90 days trading horizon Polaris Office Corp is expected to generate 3.6 times more return on investment than Korean Air. However, Polaris Office is 3.6 times more volatile than Korean Air Lines. It trades about 0.2 of its potential returns per unit of risk. Korean Air Lines is currently generating about 0.24 per unit of risk. If you would invest 523,000 in Polaris Office Corp on September 1, 2024 and sell it today you would earn a total of 130,000 from holding Polaris Office Corp or generate 24.86% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Polaris Office Corp vs. Korean Air Lines
Performance |
| Timeline |
| Polaris Office Corp |
| Korean Air Lines |
Polaris Office and Korean Air Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Polaris Office and Korean Air
The main advantage of trading using opposite Polaris Office and Korean Air positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Polaris Office 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.| Polaris Office vs. Dongsin Engineering Construction | Polaris Office vs. Doosan Fuel Cell | Polaris Office vs. Daishin Balance 1 | Polaris Office vs. Total Soft Bank |
| Korean Air vs. Korea New Network | Korean Air vs. ICD Co | Korean Air vs. DYPNF CoLtd | Korean Air vs. Busan Industrial 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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.
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