Correlation Between Youngsin Metal and Cheryong Industrial

Can any of the company-specific risk be diversified away by investing in both Youngsin Metal 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 Youngsin Metal and Cheryong Industrial 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 Cheryong Industrial CoLtd, you can compare the effects of market volatilities on Youngsin Metal 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 Youngsin Metal with a short position of Cheryong Industrial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Youngsin Metal and Cheryong Industrial.

Diversification Opportunities for Youngsin Metal and Cheryong Industrial

0.85

Correlation Coefficient

Youngsin Metal  Cheryong Industrial

Very poor diversification

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

Pair Corralation between Youngsin Metal and Cheryong Industrial

Assuming the 90 days trading horizon Youngsin Metal is expected to generate 1.8 times less return on investment than Cheryong Industrial. In addition to that, Youngsin Metal is 1.88 times more volatile than Cheryong Industrial CoLtd. It trades about 0.13 of its total potential returns per unit of risk. Cheryong Industrial CoLtd is currently generating about 0.43 per unit of volatility. If you would invest  478,718  in Cheryong Industrial CoLtd on October 11, 2024 and sell it today you would earn a total of  96,282  from holding Cheryong Industrial CoLtd or generate 20.11% return on investment over 90 days.

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

Youngsin Metal Industrial  vs.  Cheryong Industrial CoLtd

Youngsin Metal Industrial

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Youngsin Metal Industrial has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing 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 somewhat strong basic indicators, Cheryong Industrial 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 Cheryong Industrial

The main advantage of trading using opposite Youngsin Metal and Cheryong Industrial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Youngsin Metal 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 Youngsin Metal Industrial 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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.