Correlation Between Samsung Card and Korean Air

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

By analyzing existing cross correlation between Samsung Card Co and Korean Air Lines, you can compare the effects of market volatilities on Samsung Card and Korean Air 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 Samsung Card with a short position of Korean Air. Check out your portfolio center. Please also check ongoing floating volatility patterns of Samsung Card and Korean Air.

Diversification Opportunities for Samsung Card and Korean Air

-0.24

Correlation Coefficient

Samsung Card  Korean Air

Very good diversification

The 3 months correlation between Samsung and Korean is -0.24. Overlapping area represents the amount of risk that can be diversified away by holding Samsung Card Co and Korean Air Lines in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Korean Air Lines and Samsung Card 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 Samsung Card Co are associated (or correlated) with Korean Air. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Korean Air Lines has no effect on the direction of Samsung Card i.e., Samsung Card and Korean Air go up and down completely randomly.

Pair Corralation between Samsung Card and Korean Air

Assuming the 90 days trading horizon Samsung Card Co is expected to generate 1.49 times more return on investment than Korean Air. However, Samsung Card is 1.49 times more volatile than Korean Air Lines. It trades about 0.07 of its potential returns per unit of risk. Korean Air Lines is currently generating about -0.04 per unit of risk. If you would invest  2,828,675  in Samsung Card Co on December 2, 2024 and sell it today you would earn a total of  1,666,325  from holding Samsung Card Co or generate 58.91% return on investment over 90 days.

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

Samsung Card Co  vs.  Korean Air Lines

Samsung Card

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Samsung Card Co are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Samsung Card may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Korean Air Lines

Risk-Adjusted Performance

Very Weak

Over the last 90 days Korean Air Lines 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 Samsung Card and Korean Air

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

The idea behind Samsung Card Co and Korean Air Lines 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.