Correlation Between Incar Financial and Asiana Airlines

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

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

Diversification Opportunities for Incar Financial and Asiana Airlines

0.75

Correlation Coefficient

Incar Financial  Asiana Airlines

Poor diversification

The 3 months correlation between Incar and Asiana is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Incar Financial Service and Asiana Airlines in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Asiana Airlines and Incar Financial 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 Incar Financial Service 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 Incar Financial i.e., Incar Financial and Asiana Airlines go up and down completely randomly.

Pair Corralation between Incar Financial and Asiana Airlines

Assuming the 90 days trading horizon Incar Financial Service is expected to generate 1.6 times more return on investment than Asiana Airlines. However, Incar Financial is 1.6 times more volatile than Asiana Airlines. It trades about 0.19 of its potential returns per unit of risk. Asiana Airlines is currently generating about 0.09 per unit of risk. If you would invest  462,000  in Incar Financial Service on September 3, 2024 and sell it today you would earn a total of  181,000  from holding Incar Financial Service or generate 39.18% return on investment over 90 days.

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

Incar Financial Service  vs.  Asiana Airlines

Incar Financial Service

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Incar Financial Service are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Incar Financial sustained solid returns over the last few months and may actually be approaching a breakup point.

Asiana Airlines

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Asiana Airlines are ranked lower than 7 (%) 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 January 2025.

Pair Trading with Incar Financial and Asiana Airlines

The main advantage of trading using opposite Incar Financial and Asiana Airlines positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Incar Financial 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 Incar Financial Service 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.