Correlation Between Jeju Air and Dongil Metal
Can any of the company-specific risk be diversified away by investing in both Jeju Air and Dongil Metal 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 Dongil Metal 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 Dongil Metal Co, you can compare the effects of market volatilities on Jeju Air and Dongil Metal 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 Dongil Metal. Check out your portfolio center. Please also check ongoing floating volatility patterns of Jeju Air and Dongil Metal.
Diversification Opportunities for Jeju Air and Dongil Metal
0.3 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Jeju and Dongil is 0.3. Overlapping area represents the amount of risk that can be diversified away by holding Jeju Air Co and Dongil Metal Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dongil Metal 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 Dongil Metal. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dongil Metal has no effect on the direction of Jeju Air i.e., Jeju Air and Dongil Metal go up and down completely randomly.
Pair Corralation between Jeju Air and Dongil Metal
Assuming the 90 days trading horizon Jeju Air Co is expected to generate 2.21 times more return on investment than Dongil Metal. However, Jeju Air is 2.21 times more volatile than Dongil Metal Co. It trades about -0.05 of its potential returns per unit of risk. Dongil Metal Co is currently generating about -0.17 per unit of risk. If you would invest 910,000 in Jeju Air Co on September 26, 2024 and sell it today you would lose (73,000) from holding Jeju Air Co or give up 8.02% of portfolio value over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Very Weak |
Accuracy | 100.0% |
Values | Daily Returns |
Jeju Air Co vs. Dongil Metal Co
Performance |
Timeline |
Jeju Air |
Dongil Metal |
Jeju Air and Dongil Metal Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Jeju Air and Dongil Metal
The main advantage of trading using opposite Jeju Air and Dongil Metal positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Jeju Air position performs unexpectedly, Dongil Metal 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 Dongil Metal will offset losses from the drop in Dongil Metal's long position.Jeju Air vs. Busan Industrial Co | Jeju Air vs. Busan Ind | Jeju Air vs. Mirae Asset Daewoo | Jeju Air vs. Shinhan WTI Futures |
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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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.
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