Correlation Between Jeju Air and Dongwon System
Can any of the company-specific risk be diversified away by investing in both Jeju Air and Dongwon System 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 Jeju Air and Dongwon System into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Jeju Air Co and Dongwon System, you can compare the effects of market volatilities on Jeju Air and Dongwon System 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 Jeju Air with a short position of Dongwon System. Check out your portfolio center. Please also check ongoing floating volatility patterns of Jeju Air and Dongwon System.
Diversification Opportunities for Jeju Air and Dongwon System
0.23 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Jeju and Dongwon is 0.23. Overlapping area represents the amount of risk that can be diversified away by holding Jeju Air Co and Dongwon System in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dongwon System and Jeju 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 Jeju Air Co are associated (or correlated) with Dongwon System. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dongwon System has no effect on the direction of Jeju Air i.e., Jeju Air and Dongwon System go up and down completely randomly.
Pair Corralation between Jeju Air and Dongwon System
Assuming the 90 days trading horizon Jeju Air Co is expected to generate 0.81 times more return on investment than Dongwon System. However, Jeju Air Co is 1.24 times less risky than Dongwon System. It trades about 0.0 of its potential returns per unit of risk. Dongwon System is currently generating about -0.02 per unit of risk. If you would invest 888,000 in Jeju Air Co on September 14, 2024 and sell it today you would lose (8,000) from holding Jeju Air Co or give up 0.9% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Jeju Air Co vs. Dongwon System
Performance |
| Timeline |
| Jeju Air |
| Dongwon System |
Jeju Air and Dongwon System Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Jeju Air and Dongwon System
The main advantage of trading using opposite Jeju Air and Dongwon System positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Jeju Air position performs unexpectedly, Dongwon System 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 Dongwon System will offset losses from the drop in Dongwon System's long position.| Jeju Air vs. Korea New Network | Jeju Air vs. Solution Advanced Technology | Jeju Air vs. Busan Industrial Co | Jeju Air vs. Busan Ind |
| Dongwon System vs. DSC Investment | Dongwon System vs. Jeju Air Co | Dongwon System vs. Woori Technology Investment | Dongwon System vs. CU Medical Systems |
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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.
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