Correlation Between Organic Special and Asiana Airlines

Can any of the company-specific risk be diversified away by investing in both Organic Special and Asiana Airlines 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 Organic Special and Asiana Airlines into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Organic Special Pet and Asiana Airlines, you can compare the effects of market volatilities on Organic Special and Asiana Airlines 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 Organic Special with a short position of Asiana Airlines. Check out your portfolio center. Please also check ongoing floating volatility patterns of Organic Special and Asiana Airlines.

Diversification Opportunities for Organic Special and Asiana Airlines

-0.61

Correlation Coefficient

Organic Special  Asiana Airlines

Excellent diversification

The 3 months correlation between Organic and Asiana is -0.61. Overlapping area represents the amount of risk that can be diversified away by holding Organic Special Pet and Asiana Airlines in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Asiana Airlines and Organic Special 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 Organic Special Pet are associated (or correlated) with Asiana Airlines. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Asiana Airlines has no effect on the direction of Organic Special i.e., Organic Special and Asiana Airlines go up and down completely randomly.

Pair Corralation between Organic Special and Asiana Airlines

Assuming the 90 days trading horizon Organic Special Pet is expected to generate 1.06 times more return on investment than Asiana Airlines. However, Organic Special is 1.06 times more volatile than Asiana Airlines. It trades about 0.04 of its potential returns per unit of risk. Asiana Airlines is currently generating about 0.02 per unit of risk. If you would invest  285,500  in Organic Special Pet on September 20, 2024 and sell it today you would earn a total of  4,500  from holding Organic Special Pet or generate 1.58% return on investment over 90 days.

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

Organic Special Pet  vs.  Asiana Airlines

Organic Special Pet

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Organic Special Pet has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Asiana Airlines

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Asiana Airlines are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Asiana Airlines is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Organic Special and Asiana Airlines

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

The idea behind Organic Special Pet and Asiana Airlines 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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..