Correlation Between Jeju Air and Samsung Fire

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

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

Diversification Opportunities for Jeju Air and Samsung Fire

0.12

Correlation Coefficient

Jeju Air  Samsung Fire

Average diversification

The 3 months correlation between Jeju and Samsung is 0.12. Overlapping area represents the amount of risk that can be diversified away by holding Jeju Air Co and Samsung Fire Marine in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Samsung Fire Marine and Jeju Air 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 Jeju Air Co are associated (or correlated) with Samsung Fire. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Samsung Fire Marine has no effect on the direction of Jeju Air i.e., Jeju Air and Samsung Fire go up and down completely randomly.

Pair Corralation between Jeju Air and Samsung Fire

Assuming the 90 days trading horizon Jeju Air Co is expected to under-perform the Samsung Fire. But the stock apears to be less risky and, when comparing its historical volatility, Jeju Air Co is 1.1 times less risky than Samsung Fire. The stock trades about -0.09 of its potential returns per unit of risk. The Samsung Fire Marine is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  33,400,000  in Samsung Fire Marine on October 10, 2024 and sell it today you would earn a total of  2,400,000  from holding Samsung Fire Marine or generate 7.19% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	98.39%
Values	Daily Returns

Jeju Air Co  vs.  Samsung Fire Marine

Jeju Air

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Jeju Air Co has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Samsung Fire Marine

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Samsung Fire Marine are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Samsung Fire may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Jeju Air and Samsung Fire

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

The idea behind Jeju Air Co and Samsung Fire Marine 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 Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.