Correlation Between Korean Air and Seung Il

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

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

Diversification Opportunities for Korean Air and Seung Il

0.49

Correlation Coefficient

Korean Air  Seung Il

Very weak diversification

The 3 months correlation between Korean and Seung is 0.49. Overlapping area represents the amount of risk that can be diversified away by holding Korean Air Lines and Seung Il in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Seung Il and Korean 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 Korean Air Lines are associated (or correlated) with Seung Il. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Seung Il has no effect on the direction of Korean Air i.e., Korean Air and Seung Il go up and down completely randomly.

Pair Corralation between Korean Air and Seung Il

Assuming the 90 days trading horizon Korean Air is expected to generate 2.13 times less return on investment than Seung Il. But when comparing it to its historical volatility, Korean Air Lines is 1.4 times less risky than Seung Il. It trades about 0.06 of its potential returns per unit of risk. Seung Il is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  701,000  in Seung Il on September 26, 2024 and sell it today you would earn a total of  88,000  from holding Seung Il or generate 12.55% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.39%
Values	Daily Returns

Korean Air Lines  vs.  Seung Il

Korean Air Lines

Risk-Adjusted Performance

4 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Korean Air Lines are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Korean Air may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Seung Il

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Seung Il are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Seung Il sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Korean Air and Seung Il

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

The idea behind Korean Air Lines and Seung Il 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.