Correlation Between Korean Air and Kbi Metal

Can any of the company-specific risk be diversified away by investing in both Korean Air and Kbi Metal 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 Korean Air and Kbi Metal into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Korean Air Lines and Kbi Metal Co, you can compare the effects of market volatilities on Korean Air and Kbi Metal 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 Korean Air with a short position of Kbi Metal. Check out your portfolio center. Please also check ongoing floating volatility patterns of Korean Air and Kbi Metal.

Diversification Opportunities for Korean Air and Kbi Metal

0.32

Correlation Coefficient

Korean Air  Kbi Metal

Weak diversification

The 3 months correlation between Korean and Kbi is 0.32. Overlapping area represents the amount of risk that can be diversified away by holding Korean Air Lines and Kbi Metal Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kbi Metal and Korean 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 Korean Air Lines are associated (or correlated) with Kbi Metal. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kbi Metal has no effect on the direction of Korean Air i.e., Korean Air and Kbi Metal go up and down completely randomly.

Pair Corralation between Korean Air and Kbi Metal

Assuming the 90 days trading horizon Korean Air Lines is expected to under-perform the Kbi Metal. But the stock apears to be less risky and, when comparing its historical volatility, Korean Air Lines is 2.02 times less risky than Kbi Metal. The stock trades about -0.01 of its potential returns per unit of risk. The Kbi Metal Co is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  193,300  in Kbi Metal Co on December 28, 2024 and sell it today you would earn a total of  12,200  from holding Kbi Metal Co or generate 6.31% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Korean Air Lines  vs.  Kbi Metal Co

Korean Air Lines

Risk-Adjusted Performance

Very Weak

Over the last 90 days Korean Air Lines has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Korean Air is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Kbi Metal

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Kbi Metal Co are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Kbi Metal may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Korean Air and Kbi Metal

The main advantage of trading using opposite Korean Air and Kbi Metal positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Korean Air position performs unexpectedly, Kbi Metal 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 Kbi Metal will offset losses from the drop in Kbi Metal's long position.

The idea behind Korean Air Lines and Kbi Metal 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.

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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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.