Correlation Between Dongbang Transport and Korean Air

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

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

Diversification Opportunities for Dongbang Transport and Korean Air

0.24

Correlation Coefficient

Dongbang Transport  Korean Air

Modest diversification

The 3 months correlation between Dongbang and Korean is 0.24. Overlapping area represents the amount of risk that can be diversified away by holding Dongbang Transport Logistics and Korean Air Lines in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Korean Air Lines and Dongbang Transport 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 Dongbang Transport Logistics are associated (or correlated) with Korean Air. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Korean Air Lines has no effect on the direction of Dongbang Transport i.e., Dongbang Transport and Korean Air go up and down completely randomly.

Pair Corralation between Dongbang Transport and Korean Air

Assuming the 90 days trading horizon Dongbang Transport Logistics is expected to generate 1.48 times more return on investment than Korean Air. However, Dongbang Transport is 1.48 times more volatile than Korean Air Lines. It trades about 0.09 of its potential returns per unit of risk. Korean Air Lines is currently generating about -0.12 per unit of risk. If you would invest  215,500  in Dongbang Transport Logistics on December 2, 2024 and sell it today you would earn a total of  10,000  from holding Dongbang Transport Logistics or generate 4.64% return on investment over 90 days.

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

Dongbang Transport Logistics  vs.  Korean Air Lines

Dongbang Transport

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Dongbang Transport Logistics are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Dongbang Transport is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

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.

Pair Trading with Dongbang Transport and Korean Air

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

The idea behind Dongbang Transport Logistics and Korean Air Lines 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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.