Correlation Between Jeju Air and HLB Pharmaceutical

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

Diversification Opportunities for Jeju Air and HLB Pharmaceutical

-0.37

Correlation Coefficient

Jeju Air  HLB Pharmaceutical

Very good diversification

The 3 months correlation between Jeju and HLB is -0.37. Overlapping area represents the amount of risk that can be diversified away by holding Jeju Air Co and HLB Pharmaceutical Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on HLB Pharmaceutical 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 HLB Pharmaceutical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of HLB Pharmaceutical has no effect on the direction of Jeju Air i.e., Jeju Air and HLB Pharmaceutical go up and down completely randomly.

Pair Corralation between Jeju Air and HLB Pharmaceutical

Assuming the 90 days trading horizon Jeju Air Co is expected to under-perform the HLB Pharmaceutical. But the stock apears to be less risky and, when comparing its historical volatility, Jeju Air Co is 4.9 times less risky than HLB Pharmaceutical. The stock trades about -0.11 of its potential returns per unit of risk. The HLB Pharmaceutical Co is currently generating about 0.0 of returns per unit of risk over similar time horizon. If you would invest  2,410,000  in HLB Pharmaceutical Co on December 30, 2024 and sell it today you would lose (285,000) from holding HLB Pharmaceutical Co or give up 11.83% of portfolio value over 90 days.

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

Jeju Air Co  vs.  HLB Pharmaceutical Co

Jeju Air

Risk-Adjusted Performance

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 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.

HLB Pharmaceutical

Risk-Adjusted Performance

Very Weak

Over the last 90 days HLB Pharmaceutical Co has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, HLB Pharmaceutical 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 HLB Pharmaceutical

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

The idea behind Jeju Air Co and HLB Pharmaceutical 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.