Correlation Between Youl Chon and Fantagio Corp

Can any of the company-specific risk be diversified away by investing in both Youl Chon and Fantagio Corp 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 Youl Chon and Fantagio Corp into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Youl Chon Chemical and Fantagio Corp, you can compare the effects of market volatilities on Youl Chon and Fantagio Corp 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 Youl Chon with a short position of Fantagio Corp. Check out your portfolio center. Please also check ongoing floating volatility patterns of Youl Chon and Fantagio Corp.

Diversification Opportunities for Youl Chon and Fantagio Corp

0.32

Correlation Coefficient

Youl Chon  Fantagio Corp

Weak diversification

The 3 months correlation between Youl and Fantagio is 0.32. Overlapping area represents the amount of risk that can be diversified away by holding Youl Chon Chemical and Fantagio Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fantagio Corp and Youl Chon 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 Youl Chon Chemical are associated (or correlated) with Fantagio Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fantagio Corp has no effect on the direction of Youl Chon i.e., Youl Chon and Fantagio Corp go up and down completely randomly.

Pair Corralation between Youl Chon and Fantagio Corp

Assuming the 90 days trading horizon Youl Chon Chemical is expected to generate 1.6 times more return on investment than Fantagio Corp. However, Youl Chon is 1.6 times more volatile than Fantagio Corp. It trades about -0.09 of its potential returns per unit of risk. Fantagio Corp is currently generating about -0.18 per unit of risk. If you would invest  3,090,000  in Youl Chon Chemical on September 21, 2024 and sell it today you would lose (1,085,000) from holding Youl Chon Chemical or give up 35.11% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	86.14%
Values	Daily Returns

Youl Chon Chemical  vs.  Fantagio Corp

Youl Chon Chemical

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Youl Chon Chemical 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.

Fantagio Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Fantagio Corp 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 January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Youl Chon and Fantagio Corp

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

The idea behind Youl Chon Chemical and Fantagio Corp 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.