Correlation Between Jeju Air and BYON

Can any of the company-specific risk be diversified away by investing in both Jeju Air and BYON 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 BYON 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 BYON Co, you can compare the effects of market volatilities on Jeju Air and BYON 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 BYON. Check out your portfolio center. Please also check ongoing floating volatility patterns of Jeju Air and BYON.

Diversification Opportunities for Jeju Air and BYON

0.11

Correlation Coefficient

Jeju Air  BYON

Average diversification

The 3 months correlation between Jeju and BYON is 0.11. Overlapping area represents the amount of risk that can be diversified away by holding Jeju Air Co and BYON Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BYON 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 BYON. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BYON has no effect on the direction of Jeju Air i.e., Jeju Air and BYON go up and down completely randomly.

Pair Corralation between Jeju Air and BYON

Assuming the 90 days trading horizon Jeju Air Co is expected to generate 0.36 times more return on investment than BYON. However, Jeju Air Co is 2.78 times less risky than BYON. It trades about 0.06 of its potential returns per unit of risk. BYON Co is currently generating about 0.01 per unit of risk. If you would invest  885,000  in Jeju Air Co on September 4, 2024 and sell it today you would earn a total of  53,000  from holding Jeju Air Co or generate 5.99% return on investment over 90 days.

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

Jeju Air Co  vs.  BYON Co

Jeju Air

Risk-Adjusted Performance

4 of 100

Insignificant

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

BYON

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in BYON Co are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, BYON is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Jeju Air and BYON

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

The idea behind Jeju Air Co and BYON 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.

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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.