Correlation Between Korea Air and Derkwoo Electronics

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

Diversification Opportunities for Korea Air and Derkwoo Electronics

-0.29

Correlation Coefficient

Korea Air  Derkwoo Electronics

Very good diversification

The 3 months correlation between Korea and Derkwoo is -0.29. Overlapping area represents the amount of risk that can be diversified away by holding Korea Air Svc and Derkwoo Electronics Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Derkwoo Electronics 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 Derkwoo Electronics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Derkwoo Electronics has no effect on the direction of Korea Air i.e., Korea Air and Derkwoo Electronics go up and down completely randomly.

Pair Corralation between Korea Air and Derkwoo Electronics

Assuming the 90 days trading horizon Korea Air Svc is expected to generate 0.81 times more return on investment than Derkwoo Electronics. However, Korea Air Svc is 1.23 times less risky than Derkwoo Electronics. It trades about 0.09 of its potential returns per unit of risk. Derkwoo Electronics Co is currently generating about 0.0 per unit of risk. If you would invest  5,290,000  in Korea Air Svc on September 20, 2024 and sell it today you would earn a total of  280,000  from holding Korea Air Svc or generate 5.29% return on investment over 90 days.

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

Korea Air Svc  vs.  Derkwoo Electronics Co

Korea Air Svc

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Korea Air Svc are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Korea Air may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Derkwoo Electronics

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Derkwoo Electronics Co 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 Derkwoo Electronics

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

The idea behind Korea Air Svc and Derkwoo Electronics 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.