Correlation Between Asiana Airlines and Seoul Broadcasting

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

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

Diversification Opportunities for Asiana Airlines and Seoul Broadcasting

0.21

Correlation Coefficient

Asiana Airlines  Seoul Broadcasting

Modest diversification

The 3 months correlation between Asiana and Seoul is 0.21. Overlapping area represents the amount of risk that can be diversified away by holding Asiana Airlines and Seoul Broadcasting System in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Seoul Broadcasting System 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 Seoul Broadcasting. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Seoul Broadcasting System has no effect on the direction of Asiana Airlines i.e., Asiana Airlines and Seoul Broadcasting go up and down completely randomly.

Pair Corralation between Asiana Airlines and Seoul Broadcasting

Assuming the 90 days trading horizon Asiana Airlines is expected to under-perform the Seoul Broadcasting. But the stock apears to be less risky and, when comparing its historical volatility, Asiana Airlines is 1.78 times less risky than Seoul Broadcasting. The stock trades about -0.04 of its potential returns per unit of risk. The Seoul Broadcasting System is currently generating about 0.0 of returns per unit of risk over similar time horizon. If you would invest  3,088,537  in Seoul Broadcasting System on October 13, 2024 and sell it today you would lose (628,537) from holding Seoul Broadcasting System or give up 20.35% of portfolio value over 90 days.

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

Asiana Airlines  vs.  Seoul Broadcasting System

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.

Seoul Broadcasting System

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Seoul Broadcasting System are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Seoul Broadcasting sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Asiana Airlines and Seoul Broadcasting

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

The idea behind Asiana Airlines and Seoul Broadcasting System 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.