Correlation Between Korea New and Korea Aerospace

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

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

Diversification Opportunities for Korea New and Korea Aerospace

0.1

Correlation Coefficient

Korea New  Korea Aerospace

Average diversification

The 3 months correlation between Korea and Korea is 0.1. Overlapping area represents the amount of risk that can be diversified away by holding Korea New Network and Korea Aerospace Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Korea Aerospace Indu and Korea New 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 New Network are associated (or correlated) with Korea Aerospace. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Korea Aerospace Indu has no effect on the direction of Korea New i.e., Korea New and Korea Aerospace go up and down completely randomly.

Pair Corralation between Korea New and Korea Aerospace

Assuming the 90 days trading horizon Korea New Network is expected to generate 0.86 times more return on investment than Korea Aerospace. However, Korea New Network is 1.16 times less risky than Korea Aerospace. It trades about 0.16 of its potential returns per unit of risk. Korea Aerospace Industries is currently generating about 0.04 per unit of risk. If you would invest  72,400  in Korea New Network on September 13, 2024 and sell it today you would earn a total of  16,700  from holding Korea New Network or generate 23.07% return on investment over 90 days.

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

Korea New Network  vs.  Korea Aerospace Industries

Korea New Network

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Korea New Network are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Korea New sustained solid returns over the last few months and may actually be approaching a breakup point.

Korea Aerospace Indu

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Korea Aerospace Industries are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Korea Aerospace may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Korea New and Korea Aerospace

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

The idea behind Korea New Network and Korea Aerospace Industries 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.

Check out your portfolio center.

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 Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.