Correlation Between Itcen Co and Air Busan
Can any of the company-specific risk be diversified away by investing in both Itcen Co and Air Busan 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 Itcen Co and Air Busan into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Itcen Co and Air Busan Co, you can compare the effects of market volatilities on Itcen Co and Air Busan 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 Itcen Co with a short position of Air Busan. Check out your portfolio center. Please also check ongoing floating volatility patterns of Itcen Co and Air Busan.
Diversification Opportunities for Itcen Co and Air Busan
Very weak diversification
The 3 months correlation between Itcen and Air is 0.41. Overlapping area represents the amount of risk that can be diversified away by holding Itcen Co and Air Busan Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Air Busan and Itcen Co 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 Itcen Co are associated (or correlated) with Air Busan. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Air Busan has no effect on the direction of Itcen Co i.e., Itcen Co and Air Busan go up and down completely randomly.
Pair Corralation between Itcen Co and Air Busan
Assuming the 90 days trading horizon Itcen Co is expected to generate 2.18 times more return on investment than Air Busan. However, Itcen Co is 2.18 times more volatile than Air Busan Co. It trades about -0.03 of its potential returns per unit of risk. Air Busan Co is currently generating about -0.15 per unit of risk. If you would invest 590,000 in Itcen Co on September 26, 2024 and sell it today you would lose (36,000) from holding Itcen Co or give up 6.1% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Itcen Co vs. Air Busan Co
Performance |
| Timeline |
| Itcen Co |
| Air Busan |
Itcen Co and Air Busan Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Itcen Co and Air Busan
The main advantage of trading using opposite Itcen Co and Air Busan positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Itcen Co position performs unexpectedly, Air Busan 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 Air Busan will offset losses from the drop in Air Busan's long position.| Itcen Co vs. Air Busan Co | Itcen Co vs. Hanjin Transportation Co | Itcen Co vs. Nam Hwa Construction | Itcen Co vs. Kyeryong Construction Industrial |
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 Money Managers module to screen money managers from public funds and ETFs managed around the world.
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