Correlation Between Youngsin Metal and NOVATECH

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

Diversification Opportunities for Youngsin Metal and NOVATECH

-0.16

Correlation Coefficient

Youngsin Metal  NOVATECH

Good diversification

The 3 months correlation between Youngsin and NOVATECH is -0.16. Overlapping area represents the amount of risk that can be diversified away by holding Youngsin Metal Industrial and NOVATECH Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NOVATECH 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 NOVATECH. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NOVATECH has no effect on the direction of Youngsin Metal i.e., Youngsin Metal and NOVATECH go up and down completely randomly.

Pair Corralation between Youngsin Metal and NOVATECH

Assuming the 90 days trading horizon Youngsin Metal is expected to generate 2.33 times less return on investment than NOVATECH. But when comparing it to its historical volatility, Youngsin Metal Industrial is 1.7 times less risky than NOVATECH. It trades about 0.25 of its potential returns per unit of risk. NOVATECH Co is currently generating about 0.35 of returns per unit of risk over similar time horizon. If you would invest  1,071,000  in NOVATECH Co on October 9, 2024 and sell it today you would earn a total of  526,000  from holding NOVATECH Co or generate 49.11% 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.  NOVATECH Co

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 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.

NOVATECH

Risk-Adjusted Performance

7 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in NOVATECH Co are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, NOVATECH sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Youngsin Metal and NOVATECH

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

The idea behind Youngsin Metal Industrial and NOVATECH 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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.