Correlation Between Korea Aerospace and Cheryong Industrial

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

By analyzing existing cross correlation between Korea Aerospace Industries and Cheryong Industrial CoLtd, you can compare the effects of market volatilities on Korea Aerospace and Cheryong Industrial 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 Korea Aerospace with a short position of Cheryong Industrial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Korea Aerospace and Cheryong Industrial.

Diversification Opportunities for Korea Aerospace and Cheryong Industrial

-0.51

Correlation Coefficient

Korea Aerospace  Cheryong Industrial

Excellent diversification

The 3 months correlation between Korea and Cheryong is -0.51. Overlapping area represents the amount of risk that can be diversified away by holding Korea Aerospace Industries and Cheryong Industrial CoLtd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cheryong Industrial CoLtd and Korea Aerospace 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 Korea Aerospace Industries are associated (or correlated) with Cheryong Industrial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cheryong Industrial CoLtd has no effect on the direction of Korea Aerospace i.e., Korea Aerospace and Cheryong Industrial go up and down completely randomly.

Pair Corralation between Korea Aerospace and Cheryong Industrial

Assuming the 90 days trading horizon Korea Aerospace is expected to generate 3.31 times less return on investment than Cheryong Industrial. But when comparing it to its historical volatility, Korea Aerospace Industries is 2.11 times less risky than Cheryong Industrial. It trades about 0.03 of its potential returns per unit of risk. Cheryong Industrial CoLtd is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  361,619  in Cheryong Industrial CoLtd on September 12, 2024 and sell it today you would earn a total of  134,381  from holding Cheryong Industrial CoLtd or generate 37.16% return on investment over 90 days.

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

Korea Aerospace Industries  vs.  Cheryong Industrial CoLtd

Korea Aerospace Indu

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Korea Aerospace Industries are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Korea Aerospace is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Cheryong Industrial CoLtd

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Cheryong Industrial CoLtd 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 Korea Aerospace and Cheryong Industrial

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

The idea behind Korea Aerospace Industries and Cheryong Industrial CoLtd 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.