Correlation Between Jin Air and Jeju Bank

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

By analyzing existing cross correlation between Jin Air Co and Jeju Bank, you can compare the effects of market volatilities on Jin Air and Jeju Bank 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 Jin Air with a short position of Jeju Bank. Check out your portfolio center. Please also check ongoing floating volatility patterns of Jin Air and Jeju Bank.

Diversification Opportunities for Jin Air and Jeju Bank

-0.11

Correlation Coefficient

Jin Air  Jeju Bank

Good diversification

The 3 months correlation between Jin and Jeju is -0.11. Overlapping area represents the amount of risk that can be diversified away by holding Jin Air Co and Jeju Bank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Jeju Bank and Jin Air 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 Jin Air Co are associated (or correlated) with Jeju Bank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Jeju Bank has no effect on the direction of Jin Air i.e., Jin Air and Jeju Bank go up and down completely randomly.

Pair Corralation between Jin Air and Jeju Bank

Assuming the 90 days trading horizon Jin Air Co is expected to generate 1.14 times more return on investment than Jeju Bank. However, Jin Air is 1.14 times more volatile than Jeju Bank. It trades about -0.04 of its potential returns per unit of risk. Jeju Bank is currently generating about -0.11 per unit of risk. If you would invest  1,161,000  in Jin Air Co on September 30, 2024 and sell it today you would lose (171,000) from holding Jin Air Co or give up 14.73% of portfolio value over 90 days.

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

Jin Air Co  vs.  Jeju Bank

Jin Air

Risk-Adjusted Performance

0 of 100

Very Weak

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

Jeju Bank

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Jin Air and Jeju Bank

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

The idea behind Jin Air Co and Jeju Bank 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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.