Correlation Between Youngsin Metal and Daedong Metals

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

By analyzing existing cross correlation between Youngsin Metal Industrial and Daedong Metals Co, you can compare the effects of market volatilities on Youngsin Metal and Daedong Metals 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 Youngsin Metal with a short position of Daedong Metals. Check out your portfolio center. Please also check ongoing floating volatility patterns of Youngsin Metal and Daedong Metals.

Diversification Opportunities for Youngsin Metal and Daedong Metals

-0.39

Correlation Coefficient

Youngsin Metal  Daedong Metals

Very good diversification

The 3 months correlation between Youngsin and Daedong is -0.39. Overlapping area represents the amount of risk that can be diversified away by holding Youngsin Metal Industrial and Daedong Metals Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Daedong Metals and Youngsin Metal 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 Youngsin Metal Industrial are associated (or correlated) with Daedong Metals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Daedong Metals has no effect on the direction of Youngsin Metal i.e., Youngsin Metal and Daedong Metals go up and down completely randomly.

Pair Corralation between Youngsin Metal and Daedong Metals

Assuming the 90 days trading horizon Youngsin Metal Industrial is expected to generate 0.91 times more return on investment than Daedong Metals. However, Youngsin Metal Industrial is 1.1 times less risky than Daedong Metals. It trades about 0.02 of its potential returns per unit of risk. Daedong Metals Co is currently generating about 0.02 per unit of risk. If you would invest  218,000  in Youngsin Metal Industrial on November 29, 2024 and sell it today you would earn a total of  3,000  from holding Youngsin Metal Industrial or generate 1.38% return on investment over 90 days.

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

Youngsin Metal Industrial  vs.  Daedong Metals Co

Youngsin Metal Industrial

Risk-Adjusted Performance

Very Weak

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

Daedong Metals

Risk-Adjusted Performance

Weak

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

Pair Trading with Youngsin Metal and Daedong Metals

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

The idea behind Youngsin Metal Industrial and Daedong Metals Co 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.