Correlation Between Ford and Korea Air
Can any of the company-specific risk be diversified away by investing in both Ford 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 Ford and Korea Air into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ford Motor and Korea Air Svc, you can compare the effects of market volatilities on Ford 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 Ford with a short position of Korea Air. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ford and Korea Air.
Diversification Opportunities for Ford and Korea Air
Average diversification
The 3 months correlation between Ford and Korea is 0.11. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor 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 Ford 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 Ford Motor 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 Ford i.e., Ford and Korea Air go up and down completely randomly.
Pair Corralation between Ford and Korea Air
Taking into account the 90-day investment horizon Ford is expected to generate 1.4 times less return on investment than Korea Air. But when comparing it to its historical volatility, Ford Motor is 1.15 times less risky than Korea Air. It trades about 0.05 of its potential returns per unit of risk. Korea Air Svc is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest 3,906,352 in Korea Air Svc on August 25, 2024 and sell it today you would earn a total of 1,383,648 from holding Korea Air Svc or generate 35.42% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 97.05% |
| Values | Daily Returns |
Ford Motor vs. Korea Air Svc
Performance |
| Timeline |
| Ford Motor |
| Korea Air Svc |
Ford and Korea Air Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ford and Korea Air
The main advantage of trading using opposite Ford and Korea Air positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ford 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.The idea behind Ford Motor and Korea Air Svc 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.| Korea Air vs. Neungyule Education | Korea Air vs. Golden Bridge Investment | Korea Air vs. Nh Investment And | Korea Air vs. SBI Investment KOREA |
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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.
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