Correlation Between Moonbae Steel and Lion Chemtech

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

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

Diversification Opportunities for Moonbae Steel and Lion Chemtech

-0.24

Correlation Coefficient

Moonbae Steel  Lion Chemtech

Very good diversification

The 3 months correlation between Moonbae and Lion is -0.24. Overlapping area represents the amount of risk that can be diversified away by holding Moonbae Steel and Lion Chemtech Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lion Chemtech and Moonbae Steel 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 Moonbae Steel are associated (or correlated) with Lion Chemtech. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lion Chemtech has no effect on the direction of Moonbae Steel i.e., Moonbae Steel and Lion Chemtech go up and down completely randomly.

Pair Corralation between Moonbae Steel and Lion Chemtech

Assuming the 90 days trading horizon Moonbae Steel is expected to generate 30.17 times less return on investment than Lion Chemtech. But when comparing it to its historical volatility, Moonbae Steel is 1.25 times less risky than Lion Chemtech. It trades about 0.01 of its potential returns per unit of risk. Lion Chemtech Co is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest  217,500  in Lion Chemtech Co on September 24, 2024 and sell it today you would earn a total of  68,500  from holding Lion Chemtech Co or generate 31.49% return on investment over 90 days.

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

Moonbae Steel  vs.  Lion Chemtech Co

Moonbae Steel

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Moonbae Steel has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Moonbae Steel is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Lion Chemtech

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Lion Chemtech Co are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Lion Chemtech sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Moonbae Steel and Lion Chemtech

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

The idea behind Moonbae Steel and Lion Chemtech 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.