Correlation Between Jin Air and Air Busan
Can any of the company-specific risk be diversified away by investing in both Jin Air 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 Jin Air and Air Busan into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Jin Air Co and Air Busan Co, you can compare the effects of market volatilities on Jin Air 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 Jin Air with a short position of Air Busan. Check out your portfolio center. Please also check ongoing floating volatility patterns of Jin Air and Air Busan.
Diversification Opportunities for Jin Air and Air Busan
Poor diversification
The 3 months correlation between Jin and Air is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding Jin Air 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 Jin 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 Jin Air 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 Jin Air i.e., Jin Air and Air Busan go up and down completely randomly.
Pair Corralation between Jin Air and Air Busan
Assuming the 90 days trading horizon Jin Air is expected to generate 18.58 times less return on investment than Air Busan. But when comparing it to its historical volatility, Jin Air Co is 1.12 times less risky than Air Busan. It trades about 0.01 of its potential returns per unit of risk. Air Busan Co is currently generating about 0.18 of returns per unit of risk over similar time horizon. If you would invest 228,000 in Air Busan Co on November 5, 2024 and sell it today you would earn a total of 11,500 from holding Air Busan Co or generate 5.04% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Jin Air Co vs. Air Busan Co
Performance |
| Timeline |
| Jin Air |
| Air Busan |
Jin Air and Air Busan Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Jin Air and Air Busan
The main advantage of trading using opposite Jin Air and Air Busan positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Jin Air 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.The idea behind Jin Air Co and Air Busan 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.| Air Busan vs. Dongwoo Farm To | Air Busan vs. Nam Hwa Construction | Air Busan vs. Hana Financial | Air Busan vs. ENERGYMACHINERY KOREA CoLtd |
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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.
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