Correlation Between Jin Air and Korean Air

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

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

Diversification Opportunities for Jin Air and Korean Air

0.82

Correlation Coefficient

Jin Air  Korean Air

Very poor diversification

The 3 months correlation between Jin and Korean is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding Jin Air Co and Korean Air Lines in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Korean Air Lines and Jin 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 Jin Air Co are associated (or correlated) with Korean Air. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Korean Air Lines has no effect on the direction of Jin Air i.e., Jin Air and Korean Air go up and down completely randomly.

Pair Corralation between Jin Air and Korean Air

Assuming the 90 days trading horizon Jin Air Co is expected to generate 3.28 times more return on investment than Korean Air. However, Jin Air is 3.28 times more volatile than Korean Air Lines. It trades about 0.02 of its potential returns per unit of risk. Korean Air Lines is currently generating about 0.01 per unit of risk. If you would invest  1,020,000  in Jin Air Co on September 12, 2024 and sell it today you would earn a total of  9,000  from holding Jin Air Co or generate 0.88% return on investment over 90 days.

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

Jin Air Co  vs.  Korean Air Lines

Jin Air

Risk-Adjusted Performance

1 of 100

Weak

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

Korean Air Lines

Risk-Adjusted Performance

1 of 100

Weak

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

Pair Trading with Jin Air and Korean Air

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

The idea behind Jin Air Co and Korean Air Lines 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..