Correlation Between Grand Korea and AeroSpace Technology

Can any of the company-specific risk be diversified away by investing in both Grand Korea and AeroSpace Technology 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 Grand Korea and AeroSpace Technology into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Grand Korea Leisure and AeroSpace Technology of, you can compare the effects of market volatilities on Grand Korea and AeroSpace Technology 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 Grand Korea with a short position of AeroSpace Technology. Check out your portfolio center. Please also check ongoing floating volatility patterns of Grand Korea and AeroSpace Technology.

Diversification Opportunities for Grand Korea and AeroSpace Technology

0.22

Correlation Coefficient

Grand Korea  AeroSpace Technology

Modest diversification

The 3 months correlation between Grand and AeroSpace is 0.22. Overlapping area represents the amount of risk that can be diversified away by holding Grand Korea Leisure and AeroSpace Technology of in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AeroSpace Technology and Grand Korea 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 Grand Korea Leisure are associated (or correlated) with AeroSpace Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AeroSpace Technology has no effect on the direction of Grand Korea i.e., Grand Korea and AeroSpace Technology go up and down completely randomly.

Pair Corralation between Grand Korea and AeroSpace Technology

Assuming the 90 days trading horizon Grand Korea Leisure is expected to under-perform the AeroSpace Technology. But the stock apears to be less risky and, when comparing its historical volatility, Grand Korea Leisure is 1.84 times less risky than AeroSpace Technology. The stock trades about -0.03 of its potential returns per unit of risk. The AeroSpace Technology of is currently generating about 0.31 of returns per unit of risk over similar time horizon. If you would invest  50,100  in AeroSpace Technology of on December 2, 2024 and sell it today you would earn a total of  33,400  from holding AeroSpace Technology of or generate 66.67% return on investment over 90 days.

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

Grand Korea Leisure  vs.  AeroSpace Technology of

Grand Korea Leisure

Risk-Adjusted Performance

Very Weak

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

AeroSpace Technology

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in AeroSpace Technology of are ranked lower than 24 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, AeroSpace Technology sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Grand Korea and AeroSpace Technology

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

The idea behind Grand Korea Leisure and AeroSpace Technology of 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.