Correlation Between Air Busan and GS Engineering
Can any of the company-specific risk be diversified away by investing in both Air Busan and GS Engineering 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 Air Busan and GS Engineering into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Air Busan Co and GS Engineering Construction, you can compare the effects of market volatilities on Air Busan and GS Engineering 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 Air Busan with a short position of GS Engineering. Check out your portfolio center. Please also check ongoing floating volatility patterns of Air Busan and GS Engineering.
Diversification Opportunities for Air Busan and GS Engineering
0.6 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Air and 006360 is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding Air Busan Co and GS Engineering Construction in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GS Engineering Const and Air Busan 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 Air Busan Co are associated (or correlated) with GS Engineering. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GS Engineering Const has no effect on the direction of Air Busan i.e., Air Busan and GS Engineering go up and down completely randomly.
Pair Corralation between Air Busan and GS Engineering
Assuming the 90 days trading horizon Air Busan Co is expected to under-perform the GS Engineering. But the stock apears to be less risky and, when comparing its historical volatility, Air Busan Co is 1.21 times less risky than GS Engineering. The stock trades about -0.03 of its potential returns per unit of risk. The GS Engineering Construction is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest 1,485,372 in GS Engineering Construction on August 27, 2024 and sell it today you would earn a total of 364,628 from holding GS Engineering Construction or generate 24.55% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Air Busan Co vs. GS Engineering Construction
Performance |
| Timeline |
| Air Busan |
| GS Engineering Const |
Air Busan and GS Engineering Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Air Busan and GS Engineering
The main advantage of trading using opposite Air Busan and GS Engineering positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Air Busan position performs unexpectedly, GS Engineering 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 GS Engineering will offset losses from the drop in GS Engineering's long position.| Air Busan vs. Busan Industrial Co | Air Busan vs. Busan Ind | Air Busan vs. Mirae Asset Daewoo | Air Busan vs. UNISEM Co |
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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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.
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