Correlation Between Asiana Airlines and Namyang Dairy

Can any of the company-specific risk be diversified away by investing in both Asiana Airlines and Namyang Dairy 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 Asiana Airlines and Namyang Dairy into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Asiana Airlines and Namyang Dairy, you can compare the effects of market volatilities on Asiana Airlines and Namyang Dairy 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 Asiana Airlines with a short position of Namyang Dairy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Asiana Airlines and Namyang Dairy.

Diversification Opportunities for Asiana Airlines and Namyang Dairy

0.76

Correlation Coefficient

Asiana Airlines  Namyang Dairy

Poor diversification

The 3 months correlation between Asiana and Namyang is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding Asiana Airlines and Namyang Dairy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Namyang Dairy and Asiana Airlines 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 Asiana Airlines are associated (or correlated) with Namyang Dairy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Namyang Dairy has no effect on the direction of Asiana Airlines i.e., Asiana Airlines and Namyang Dairy go up and down completely randomly.

Pair Corralation between Asiana Airlines and Namyang Dairy

Assuming the 90 days trading horizon Asiana Airlines is expected to generate 3.22 times less return on investment than Namyang Dairy. But when comparing it to its historical volatility, Asiana Airlines is 1.72 times less risky than Namyang Dairy. It trades about 0.09 of its potential returns per unit of risk. Namyang Dairy is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest  5,820,034  in Namyang Dairy on December 24, 2024 and sell it today you would earn a total of  1,259,966  from holding Namyang Dairy or generate 21.65% return on investment over 90 days.

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

Asiana Airlines  vs.  Namyang Dairy

Asiana Airlines

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Asiana Airlines are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Asiana Airlines may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Namyang Dairy

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Namyang Dairy are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Namyang Dairy sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Asiana Airlines and Namyang Dairy

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

The idea behind Asiana Airlines and Namyang Dairy 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.