Correlation Between Asiana Airlines and RFTech

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

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

Diversification Opportunities for Asiana Airlines and RFTech

0.34

Correlation Coefficient

Asiana Airlines  RFTech

Weak diversification

The 3 months correlation between Asiana and RFTech is 0.34. Overlapping area represents the amount of risk that can be diversified away by holding Asiana Airlines and RFTech Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on RFTech 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 RFTech. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of RFTech has no effect on the direction of Asiana Airlines i.e., Asiana Airlines and RFTech go up and down completely randomly.

Pair Corralation between Asiana Airlines and RFTech

Assuming the 90 days trading horizon Asiana Airlines is expected to generate 2.77 times less return on investment than RFTech. But when comparing it to its historical volatility, Asiana Airlines is 1.05 times less risky than RFTech. It trades about 0.05 of its potential returns per unit of risk. RFTech Co is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest  321,000  in RFTech Co on September 28, 2024 and sell it today you would earn a total of  68,000  from holding RFTech Co or generate 21.18% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.36%
Values	Daily Returns

Asiana Airlines  vs.  RFTech Co

Asiana Airlines

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Asiana Airlines are ranked lower than 4 (%) 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 January 2025.

RFTech

Risk-Adjusted Performance

10 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in RFTech Co are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, RFTech sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Asiana Airlines and RFTech

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

The idea behind Asiana Airlines and RFTech 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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.