Correlation Between Jeju Air and Haitai Confectionery

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

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

Diversification Opportunities for Jeju Air and Haitai Confectionery

0.53

Correlation Coefficient

Jeju Air  Haitai Confectionery

Very weak diversification

The 3 months correlation between Jeju and Haitai is 0.53. Overlapping area represents the amount of risk that can be diversified away by holding Jeju Air Co and Haitai Confectionery Foods in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Haitai Confectionery and Jeju 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 Jeju Air Co are associated (or correlated) with Haitai Confectionery. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Haitai Confectionery has no effect on the direction of Jeju Air i.e., Jeju Air and Haitai Confectionery go up and down completely randomly.

Pair Corralation between Jeju Air and Haitai Confectionery

Assuming the 90 days trading horizon Jeju Air Co is expected to generate 0.99 times more return on investment than Haitai Confectionery. However, Jeju Air Co is 1.01 times less risky than Haitai Confectionery. It trades about -0.05 of its potential returns per unit of risk. Haitai Confectionery Foods is currently generating about -0.12 per unit of risk. If you would invest  963,000  in Jeju Air Co on September 4, 2024 and sell it today you would lose (25,000) from holding Jeju Air Co or give up 2.6% of portfolio value over 90 days.

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

Jeju Air Co  vs.  Haitai Confectionery Foods

Jeju Air

Risk-Adjusted Performance

4 of 100

Insignificant

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

Haitai Confectionery

Risk-Adjusted Performance

4 of 100

Insignificant

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

Pair Trading with Jeju Air and Haitai Confectionery

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

The idea behind Jeju Air Co and Haitai Confectionery Foods 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.