Correlation Between Golden Bridge and Cheryong Industrial

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

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

Diversification Opportunities for Golden Bridge and Cheryong Industrial

0.85

Correlation Coefficient

Golden Bridge  Cheryong Industrial

Very poor diversification

The 3 months correlation between Golden and Cheryong is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding Golden Bridge Investment 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 Golden Bridge 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 Golden Bridge Investment 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 Golden Bridge i.e., Golden Bridge and Cheryong Industrial go up and down completely randomly.

Pair Corralation between Golden Bridge and Cheryong Industrial

Assuming the 90 days trading horizon Golden Bridge is expected to generate 3.76 times less return on investment than Cheryong Industrial. But when comparing it to its historical volatility, Golden Bridge Investment is 2.25 times less risky than Cheryong Industrial. It trades about 0.24 of its potential returns per unit of risk. Cheryong Industrial CoLtd is currently generating about 0.4 of returns per unit of risk over similar time horizon. If you would invest  478,718  in Cheryong Industrial CoLtd on October 11, 2024 and sell it today you would earn a total of  87,282  from holding Cheryong Industrial CoLtd or generate 18.23% return on investment over 90 days.

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

Golden Bridge Investment  vs.  Cheryong Industrial CoLtd

Golden Bridge Investment

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Golden Bridge Investment has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company 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 latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Golden Bridge and Cheryong Industrial

The main advantage of trading using opposite Golden Bridge and Cheryong Industrial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Golden Bridge 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 Golden Bridge Investment 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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.