Correlation Between TSI Co and Korea Air

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

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

Diversification Opportunities for TSI Co and Korea Air

-0.46

Correlation Coefficient

TSI Co  Korea Air

Very good diversification

The 3 months correlation between TSI and Korea is -0.46. Overlapping area represents the amount of risk that can be diversified away by holding TSI Co 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 TSI Co 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 TSI Co 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 TSI Co i.e., TSI Co and Korea Air go up and down completely randomly.

Pair Corralation between TSI Co and Korea Air

Assuming the 90 days trading horizon TSI Co is expected to generate 1.04 times more return on investment than Korea Air. However, TSI Co is 1.04 times more volatile than Korea Air Svc. It trades about -0.06 of its potential returns per unit of risk. Korea Air Svc is currently generating about -0.06 per unit of risk. If you would invest  639,000  in TSI Co on September 28, 2024 and sell it today you would lose (137,000) from holding TSI Co or give up 21.44% of portfolio value over 90 days.

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

TSI Co  vs.  Korea Air Svc

TSI Co

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days TSI Co has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Korea Air Svc

Risk-Adjusted Performance

5 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Korea Air Svc are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Korea Air may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with TSI Co and Korea Air

The main advantage of trading using opposite TSI Co and Korea Air positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if TSI Co 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 TSI Co 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .