Correlation Between Air Busan and Derkwoo Electronics

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

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

Diversification Opportunities for Air Busan and Derkwoo Electronics

0.69

Correlation Coefficient

Air Busan  Derkwoo Electronics

Poor diversification

The 3 months correlation between Air and Derkwoo is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding Air Busan Co and Derkwoo Electronics Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Derkwoo Electronics and Air Busan 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 Air Busan Co are associated (or correlated) with Derkwoo Electronics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Derkwoo Electronics has no effect on the direction of Air Busan i.e., Air Busan and Derkwoo Electronics go up and down completely randomly.

Pair Corralation between Air Busan and Derkwoo Electronics

Assuming the 90 days trading horizon Air Busan Co is expected to under-perform the Derkwoo Electronics. But the stock apears to be less risky and, when comparing its historical volatility, Air Busan Co is 1.46 times less risky than Derkwoo Electronics. The stock trades about -0.04 of its potential returns per unit of risk. The Derkwoo Electronics Co is currently generating about 0.0 of returns per unit of risk over similar time horizon. If you would invest  520,000  in Derkwoo Electronics Co on September 20, 2024 and sell it today you would lose (7,000) from holding Derkwoo Electronics Co or give up 1.35% of portfolio value over 90 days.

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

Air Busan Co  vs.  Derkwoo Electronics Co

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.

Derkwoo Electronics

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Derkwoo Electronics 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.

Pair Trading with Air Busan and Derkwoo Electronics

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

The idea behind Air Busan Co and Derkwoo Electronics 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.