Correlation Between Youngbo Chemical and KM

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

Diversification Opportunities for Youngbo Chemical and KM

-0.14

Correlation Coefficient

Youngbo Chemical  KM

Good diversification

The 3 months correlation between Youngbo and KM is -0.14. Overlapping area represents the amount of risk that can be diversified away by holding Youngbo Chemical Co and KM Corp. in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on KM Corporation 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 KM. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of KM Corporation has no effect on the direction of Youngbo Chemical i.e., Youngbo Chemical and KM go up and down completely randomly.

Pair Corralation between Youngbo Chemical and KM

Assuming the 90 days trading horizon Youngbo Chemical Co is expected to generate 0.34 times more return on investment than KM. However, Youngbo Chemical Co is 2.96 times less risky than KM. It trades about 0.02 of its potential returns per unit of risk. KM Corporation is currently generating about -0.11 per unit of risk. If you would invest  339,000  in Youngbo Chemical Co on September 4, 2024 and sell it today you would earn a total of  3,000  from holding Youngbo Chemical Co or generate 0.88% 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.  KM Corp.

Youngbo Chemical

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Youngbo Chemical Co are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Youngbo Chemical is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

KM Corporation

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days KM Corporation 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 Youngbo Chemical and KM

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

The idea behind Youngbo Chemical Co and KM Corporation 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.

Check out your portfolio center.

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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.