Correlation Between Han Kook and Asiana Airlines

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

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

Diversification Opportunities for Han Kook and Asiana Airlines

0.32

Correlation Coefficient

Han Kook  Asiana Airlines

Weak diversification

The 3 months correlation between Han and Asiana is 0.32. Overlapping area represents the amount of risk that can be diversified away by holding Han Kook Steel and Asiana Airlines in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Asiana Airlines and Han Kook 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 Han Kook Steel are associated (or correlated) with Asiana Airlines. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Asiana Airlines has no effect on the direction of Han Kook i.e., Han Kook and Asiana Airlines go up and down completely randomly.

Pair Corralation between Han Kook and Asiana Airlines

Assuming the 90 days trading horizon Han Kook Steel is expected to under-perform the Asiana Airlines. In addition to that, Han Kook is 1.85 times more volatile than Asiana Airlines. It trades about -0.1 of its total potential returns per unit of risk. Asiana Airlines is currently generating about 0.0 per unit of volatility. If you would invest  1,044,000  in Asiana Airlines on October 4, 2024 and sell it today you would lose (4,000) from holding Asiana Airlines or give up 0.38% of portfolio value over 90 days.

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

Han Kook Steel  vs.  Asiana Airlines

Han Kook Steel

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Han Kook Steel has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Han Kook is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Asiana Airlines

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Asiana Airlines are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Asiana Airlines sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Han Kook and Asiana Airlines

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

The idea behind Han Kook Steel and Asiana Airlines 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.