Correlation Between Jin Air and KakaoBank Corp

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

Diversification Opportunities for Jin Air and KakaoBank Corp

0.05

Correlation Coefficient

Jin Air  KakaoBank Corp

Significant diversification

The 3 months correlation between Jin and KakaoBank is 0.05. Overlapping area represents the amount of risk that can be diversified away by holding Jin Air Co and KakaoBank Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on KakaoBank Corp 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 KakaoBank Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of KakaoBank Corp has no effect on the direction of Jin Air i.e., Jin Air and KakaoBank Corp go up and down completely randomly.

Pair Corralation between Jin Air and KakaoBank Corp

Assuming the 90 days trading horizon Jin Air Co is expected to under-perform the KakaoBank Corp. But the stock apears to be less risky and, when comparing its historical volatility, Jin Air Co is 1.16 times less risky than KakaoBank Corp. The stock trades about -0.01 of its potential returns per unit of risk. The KakaoBank Corp is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  2,260,000  in KakaoBank Corp on September 26, 2024 and sell it today you would lose (45,000) from holding KakaoBank Corp or give up 1.99% of portfolio value over 90 days.

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

Jin Air Co  vs.  KakaoBank Corp

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.

KakaoBank Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days KakaoBank Corp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, KakaoBank Corp 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 KakaoBank Corp

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

The idea behind Jin Air Co and KakaoBank Corp 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 Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.