Correlation Between Korean Air and Samsung Card

Can any of the company-specific risk be diversified away by investing in both Korean Air and Samsung Card 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 Samsung Card 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 Samsung Card Co, you can compare the effects of market volatilities on Korean Air and Samsung Card 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 Samsung Card. Check out your portfolio center. Please also check ongoing floating volatility patterns of Korean Air and Samsung Card.

Diversification Opportunities for Korean Air and Samsung Card

0.25

Correlation Coefficient

Korean Air  Samsung Card

Modest diversification

The 3 months correlation between Korean and Samsung is 0.25. Overlapping area represents the amount of risk that can be diversified away by holding Korean Air Lines and Samsung Card Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Samsung Card 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 Samsung Card. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Samsung Card has no effect on the direction of Korean Air i.e., Korean Air and Samsung Card go up and down completely randomly.

Pair Corralation between Korean Air and Samsung Card

Assuming the 90 days trading horizon Korean Air Lines is expected to under-perform the Samsung Card. In addition to that, Korean Air is 1.35 times more volatile than Samsung Card Co. It trades about -0.03 of its total potential returns per unit of risk. Samsung Card Co is currently generating about 0.1 per unit of volatility. If you would invest  4,095,000  in Samsung Card Co on December 25, 2024 and sell it today you would earn a total of  265,000  from holding Samsung Card Co or generate 6.47% 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.  Samsung Card 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.

Samsung Card

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Samsung Card Co are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Samsung Card may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Korean Air and Samsung Card

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

The idea behind Korean Air Lines and Samsung Card 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.

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 Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.