Correlation Between Youngbo Chemical and Sungdo Engineering

Can any of the company-specific risk be diversified away by investing in both Youngbo Chemical and Sungdo Engineering 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 Youngbo Chemical and Sungdo Engineering into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Youngbo Chemical Co and Sungdo Engineering Construction, you can compare the effects of market volatilities on Youngbo Chemical and Sungdo Engineering 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 Youngbo Chemical with a short position of Sungdo Engineering. Check out your portfolio center. Please also check ongoing floating volatility patterns of Youngbo Chemical and Sungdo Engineering.

Diversification Opportunities for Youngbo Chemical and Sungdo Engineering

-0.26

Correlation Coefficient

Youngbo Chemical  Sungdo Engineering

Very good diversification

The 3 months correlation between Youngbo and Sungdo is -0.26. Overlapping area represents the amount of risk that can be diversified away by holding Youngbo Chemical Co and Sungdo Engineering Constructio in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sungdo Engineering and Youngbo Chemical 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 Youngbo Chemical Co are associated (or correlated) with Sungdo Engineering. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sungdo Engineering has no effect on the direction of Youngbo Chemical i.e., Youngbo Chemical and Sungdo Engineering go up and down completely randomly.

Pair Corralation between Youngbo Chemical and Sungdo Engineering

Assuming the 90 days trading horizon Youngbo Chemical is expected to generate 1.58 times less return on investment than Sungdo Engineering. But when comparing it to its historical volatility, Youngbo Chemical Co is 1.72 times less risky than Sungdo Engineering. It trades about 0.02 of its potential returns per unit of risk. Sungdo Engineering Construction is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  421,887  in Sungdo Engineering Construction on September 20, 2024 and sell it today you would earn a total of  57,113  from holding Sungdo Engineering Construction or generate 13.54% return on investment over 90 days.

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

Youngbo Chemical Co  vs.  Sungdo Engineering Constructio

Youngbo Chemical

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Youngbo Chemical Co are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Youngbo Chemical may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Sungdo Engineering

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Youngbo Chemical and Sungdo Engineering

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

The idea behind Youngbo Chemical Co and Sungdo Engineering Construction 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.