Correlation Between Korea Aerospace and ISU Abxis

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Can any of the company-specific risk be diversified away by investing in both Korea Aerospace and ISU Abxis 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 Aerospace and ISU Abxis into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Korea Aerospace Industries and ISU Abxis Co, you can compare the effects of market volatilities on Korea Aerospace and ISU Abxis 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 Aerospace with a short position of ISU Abxis. Check out your portfolio center. Please also check ongoing floating volatility patterns of Korea Aerospace and ISU Abxis.

Diversification Opportunities for Korea Aerospace and ISU Abxis

-0.74
  Correlation Coefficient

Pay attention - limited upside

The 3 months correlation between Korea and ISU is -0.74. Overlapping area represents the amount of risk that can be diversified away by holding Korea Aerospace Industries and ISU Abxis Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ISU Abxis and Korea Aerospace 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 Aerospace Industries are associated (or correlated) with ISU Abxis. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ISU Abxis has no effect on the direction of Korea Aerospace i.e., Korea Aerospace and ISU Abxis go up and down completely randomly.

Pair Corralation between Korea Aerospace and ISU Abxis

Assuming the 90 days trading horizon Korea Aerospace Industries is expected to generate 1.45 times more return on investment than ISU Abxis. However, Korea Aerospace is 1.45 times more volatile than ISU Abxis Co. It trades about 0.04 of its potential returns per unit of risk. ISU Abxis Co is currently generating about -0.5 per unit of risk. If you would invest  5,740,000  in Korea Aerospace Industries on September 3, 2024 and sell it today you would earn a total of  100,000  from holding Korea Aerospace Industries or generate 1.74% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthWeak
Accuracy100.0%
ValuesDaily Returns

Korea Aerospace Industries  vs.  ISU Abxis Co

 Performance 
       Timeline  
Korea Aerospace Indu 

Risk-Adjusted Performance

4 of 100

 
Weak
 
Strong
Insignificant
Compared to the overall equity markets, risk-adjusted returns on investments in Korea Aerospace Industries are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Korea Aerospace may actually be approaching a critical reversion point that can send shares even higher in January 2025.
ISU Abxis 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days ISU Abxis Co has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Korea Aerospace and ISU Abxis Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Korea Aerospace and ISU Abxis

The main advantage of trading using opposite Korea Aerospace and ISU Abxis positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Korea Aerospace position performs unexpectedly, ISU Abxis 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 ISU Abxis will offset losses from the drop in ISU Abxis' long position.
The idea behind Korea Aerospace Industries and ISU Abxis Co pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.
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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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.

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