Correlation Between Design and Korean Air
Can any of the company-specific risk be diversified away by investing in both Design 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 Design and Korean Air into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Design Co and Korean Air Lines, you can compare the effects of market volatilities on Design 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 Design with a short position of Korean Air. Check out your portfolio center. Please also check ongoing floating volatility patterns of Design and Korean Air.
Diversification Opportunities for Design and Korean Air
-0.24 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Design and Korean is -0.24. Overlapping area represents the amount of risk that can be diversified away by holding Design 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 Design 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 Design 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 Design i.e., Design and Korean Air go up and down completely randomly.
Pair Corralation between Design and Korean Air
Assuming the 90 days trading horizon Design is expected to generate 2.45 times less return on investment than Korean Air. In addition to that, Design is 6.08 times more volatile than Korean Air Lines. It trades about 0.0 of its total potential returns per unit of risk. Korean Air Lines is currently generating about 0.05 per unit of volatility. If you would invest 2,105,000 in Korean Air Lines on September 24, 2024 and sell it today you would earn a total of 245,000 from holding Korean Air Lines or generate 11.64% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 99.38% |
| Values | Daily Returns |
Design Co vs. Korean Air Lines
Performance |
| Timeline |
| Design |
| Korean Air Lines |
Design and Korean Air Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Design and Korean Air
The main advantage of trading using opposite Design and Korean Air positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Design 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.The idea behind Design Co and Korean Air Lines 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.| Korean Air vs. LG Display Co | Korean Air vs. Woori Technology Investment | Korean Air vs. KTB Investment Securities | Korean Air vs. Korea Computer |
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 Global Correlations module to find global opportunities by holding instruments from different markets.
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