Correlation Between Cheryong Industrial and Asiana Airlines

Can any of the company-specific risk be diversified away by investing in both Cheryong Industrial and Asiana Airlines 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 Cheryong Industrial and Asiana Airlines into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Cheryong Industrial CoLtd and Asiana Airlines, you can compare the effects of market volatilities on Cheryong Industrial and Asiana Airlines 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 Cheryong Industrial with a short position of Asiana Airlines. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cheryong Industrial and Asiana Airlines.

Diversification Opportunities for Cheryong Industrial and Asiana Airlines

-0.5

Correlation Coefficient

Cheryong Industrial  Asiana Airlines

Very good diversification

The 3 months correlation between Cheryong and Asiana is -0.5. Overlapping area represents the amount of risk that can be diversified away by holding Cheryong Industrial CoLtd and Asiana Airlines in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Asiana Airlines and Cheryong Industrial 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 Cheryong Industrial CoLtd are associated (or correlated) with Asiana Airlines. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Asiana Airlines has no effect on the direction of Cheryong Industrial i.e., Cheryong Industrial and Asiana Airlines go up and down completely randomly.

Pair Corralation between Cheryong Industrial and Asiana Airlines

Assuming the 90 days trading horizon Cheryong Industrial CoLtd is expected to under-perform the Asiana Airlines. In addition to that, Cheryong Industrial is 1.65 times more volatile than Asiana Airlines. It trades about -0.15 of its total potential returns per unit of risk. Asiana Airlines is currently generating about 0.09 per unit of volatility. If you would invest  981,000  in Asiana Airlines on September 1, 2024 and sell it today you would earn a total of  93,000  from holding Asiana Airlines or generate 9.48% return on investment over 90 days.

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

Cheryong Industrial CoLtd  vs.  Asiana Airlines

Cheryong Industrial CoLtd

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Cheryong Industrial CoLtd 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 December 2024. The current disturbance may also be a sign of long term up-swing for the company investors.

Asiana Airlines

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Asiana Airlines are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Asiana Airlines may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Pair Trading with Cheryong Industrial and Asiana Airlines

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

The idea behind Cheryong Industrial CoLtd and Asiana Airlines 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.