Correlation Between Korea Air and Samsung SDI

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

By analyzing existing cross correlation between Korea Air Svc and Samsung SDI, you can compare the effects of market volatilities on Korea Air and Samsung SDI 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 Korea Air with a short position of Samsung SDI. Check out your portfolio center. Please also check ongoing floating volatility patterns of Korea Air and Samsung SDI.

Diversification Opportunities for Korea Air and Samsung SDI

-0.41

Correlation Coefficient

Korea Air  Samsung SDI

Very good diversification

The 3 months correlation between Korea and Samsung is -0.41. Overlapping area represents the amount of risk that can be diversified away by holding Korea Air Svc and Samsung SDI in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Samsung SDI and Korea 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 Korea Air Svc are associated (or correlated) with Samsung SDI. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Samsung SDI has no effect on the direction of Korea Air i.e., Korea Air and Samsung SDI go up and down completely randomly.

Pair Corralation between Korea Air and Samsung SDI

Assuming the 90 days trading horizon Korea Air Svc is expected to generate 0.87 times more return on investment than Samsung SDI. However, Korea Air Svc is 1.14 times less risky than Samsung SDI. It trades about 0.05 of its potential returns per unit of risk. Samsung SDI is currently generating about -0.16 per unit of risk. If you would invest  5,540,000  in Korea Air Svc on September 22, 2024 and sell it today you would earn a total of  240,000  from holding Korea Air Svc or generate 4.33% return on investment over 90 days.

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

Korea Air Svc  vs.  Samsung SDI

Korea Air Svc

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Korea Air Svc are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Korea Air sustained solid returns over the last few months and may actually be approaching a breakup point.

Samsung SDI

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Samsung SDI has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Korea Air and Samsung SDI

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

The idea behind Korea Air Svc and Samsung SDI 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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.