Correlation Between Asiana Airlines and Korea Electric

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

By analyzing existing cross correlation between Asiana Airlines and Korea Electric Power, you can compare the effects of market volatilities on Asiana Airlines and Korea Electric 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 Korea Electric. Check out your portfolio center. Please also check ongoing floating volatility patterns of Asiana Airlines and Korea Electric.

Diversification Opportunities for Asiana Airlines and Korea Electric

0.02

Correlation Coefficient

Asiana Airlines  Korea Electric

Significant diversification

The 3 months correlation between Asiana and Korea is 0.02. Overlapping area represents the amount of risk that can be diversified away by holding Asiana Airlines and Korea Electric Power in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Korea Electric Power 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 Korea Electric. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Korea Electric Power has no effect on the direction of Asiana Airlines i.e., Asiana Airlines and Korea Electric go up and down completely randomly.

Pair Corralation between Asiana Airlines and Korea Electric

Assuming the 90 days trading horizon Asiana Airlines is expected to under-perform the Korea Electric. But the stock apears to be less risky and, when comparing its historical volatility, Asiana Airlines is 1.03 times less risky than Korea Electric. The stock trades about -0.03 of its potential returns per unit of risk. The Korea Electric Power is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  1,949,000  in Korea Electric Power on October 24, 2024 and sell it today you would earn a total of  171,000  from holding Korea Electric Power or generate 8.77% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	99.79%
Values	Daily Returns

Asiana Airlines  vs.  Korea Electric Power

Asiana Airlines

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Asiana Airlines are ranked lower than 5 (%) 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 February 2025.

Korea Electric Power

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Korea Electric Power has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Asiana Airlines and Korea Electric

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

The idea behind Asiana Airlines and Korea Electric Power 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.