Correlation Between SEOJEON ELECTRIC and Korea Air

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

By analyzing existing cross correlation between SEOJEON ELECTRIC MACHINERY and Korea Air Svc, you can compare the effects of market volatilities on SEOJEON ELECTRIC and Korea Air 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 SEOJEON ELECTRIC with a short position of Korea Air. Check out your portfolio center. Please also check ongoing floating volatility patterns of SEOJEON ELECTRIC and Korea Air.

Diversification Opportunities for SEOJEON ELECTRIC and Korea Air

-0.04

Correlation Coefficient

SEOJEON ELECTRIC  Korea Air

Good diversification

The 3 months correlation between SEOJEON and Korea is -0.04. Overlapping area represents the amount of risk that can be diversified away by holding SEOJEON ELECTRIC MACHINERY and Korea Air Svc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Korea Air Svc and SEOJEON ELECTRIC 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 SEOJEON ELECTRIC MACHINERY are associated (or correlated) with Korea Air. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Korea Air Svc has no effect on the direction of SEOJEON ELECTRIC i.e., SEOJEON ELECTRIC and Korea Air go up and down completely randomly.

Pair Corralation between SEOJEON ELECTRIC and Korea Air

Assuming the 90 days trading horizon SEOJEON ELECTRIC is expected to generate 10.21 times less return on investment than Korea Air. In addition to that, SEOJEON ELECTRIC is 1.64 times more volatile than Korea Air Svc. It trades about 0.0 of its total potential returns per unit of risk. Korea Air Svc is currently generating about 0.04 per unit of volatility. If you would invest  4,209,853  in Korea Air Svc on October 24, 2024 and sell it today you would earn a total of  1,400,147  from holding Korea Air Svc or generate 33.26% return on investment over 90 days.

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

SEOJEON ELECTRIC MACHINERY  vs.  Korea Air Svc

SEOJEON ELECTRIC MAC

Risk-Adjusted Performance

0 of 100

Very Weak

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

Korea Air Svc

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with SEOJEON ELECTRIC and Korea Air

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

The idea behind SEOJEON ELECTRIC MACHINERY and Korea Air Svc 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 Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.