Correlation Between Incar Financial and Air Busan

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

Diversification Opportunities for Incar Financial and Air Busan

-0.3

Correlation Coefficient

Incar Financial  Air Busan

Very good diversification

The 3 months correlation between Incar and Air is -0.3. Overlapping area represents the amount of risk that can be diversified away by holding Incar Financial Service and Air Busan Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Air Busan 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 Air Busan. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Air Busan has no effect on the direction of Incar Financial i.e., Incar Financial and Air Busan go up and down completely randomly.

Pair Corralation between Incar Financial and Air Busan

Assuming the 90 days trading horizon Incar Financial Service is expected to generate 2.03 times more return on investment than Air Busan. However, Incar Financial is 2.03 times more volatile than Air Busan Co. It trades about 0.04 of its potential returns per unit of risk. Air Busan Co is currently generating about -0.01 per unit of risk. If you would invest  644,930  in Incar Financial Service on September 22, 2024 and sell it today you would lose (83,930) from holding Incar Financial Service or give up 13.01% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	97.93%
Values	Daily Returns

Incar Financial Service  vs.  Air Busan Co

Incar Financial Service

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Incar Financial Service are ranked lower than 8 (%) 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.

Air Busan

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Incar Financial and Air Busan

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

The idea behind Incar Financial Service and Air Busan 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.