Correlation Between Hurum and Korea Air
Can any of the company-specific risk be diversified away by investing in both Hurum and Korea 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 Hurum and Korea Air into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Hurum Co and Korea Air Svc, you can compare the effects of market volatilities on Hurum and Korea 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 Hurum with a short position of Korea Air. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hurum and Korea Air.
Diversification Opportunities for Hurum and Korea Air
Good diversification
The 3 months correlation between Hurum and Korea is -0.03. Overlapping area represents the amount of risk that can be diversified away by holding Hurum Co and Korea Air Svc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Korea Air Svc and Hurum 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 Hurum Co are associated (or correlated) with Korea Air. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Korea Air Svc has no effect on the direction of Hurum i.e., Hurum and Korea Air go up and down completely randomly.
Pair Corralation between Hurum and Korea Air
Assuming the 90 days trading horizon Hurum Co is expected to under-perform the Korea Air. But the stock apears to be less risky and, when comparing its historical volatility, Hurum Co is 1.01 times less risky than Korea Air. The stock trades about -0.1 of its potential returns per unit of risk. The Korea Air Svc is currently generating about -0.07 of returns per unit of risk over similar time horizon. If you would invest 7,100,000 in Korea Air Svc on August 24, 2024 and sell it today you would lose (1,770,000) from holding Korea Air Svc or give up 24.93% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Hurum Co vs. Korea Air Svc
Performance |
| Timeline |
| Hurum |
| Korea Air Svc |
Hurum and Korea Air Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Hurum and Korea Air
The main advantage of trading using opposite Hurum and Korea Air positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Hurum position performs unexpectedly, Korea 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 Korea Air will offset losses from the drop in Korea Air's long position.| Hurum vs. Iljin Materials Co | Hurum vs. Lotte Energy Materials | Hurum vs. Top Material Co | Hurum vs. National Plastic Co |
| Korea Air vs. Xavis Co | Korea Air vs. Hurum Co | Korea Air vs. Daishin Balance No8 | Korea Air vs. Korea Real Estate |
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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.
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