Correlation Between Youngbo Chemical and ENERGYMACHINERY KOREA

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

Diversification Opportunities for Youngbo Chemical and ENERGYMACHINERY KOREA

0.33

Correlation Coefficient

Youngbo Chemical  ENERGYMACHINERY KOREA

Weak diversification

The 3 months correlation between Youngbo and ENERGYMACHINERY is 0.33. Overlapping area represents the amount of risk that can be diversified away by holding Youngbo Chemical Co and ENERGYMACHINERY KOREA CoLtd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ENERGYMACHINERY KOREA 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 ENERGYMACHINERY KOREA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ENERGYMACHINERY KOREA has no effect on the direction of Youngbo Chemical i.e., Youngbo Chemical and ENERGYMACHINERY KOREA go up and down completely randomly.

Pair Corralation between Youngbo Chemical and ENERGYMACHINERY KOREA

Assuming the 90 days trading horizon Youngbo Chemical Co is expected to generate 0.43 times more return on investment than ENERGYMACHINERY KOREA. However, Youngbo Chemical Co is 2.35 times less risky than ENERGYMACHINERY KOREA. It trades about 0.21 of its potential returns per unit of risk. ENERGYMACHINERY KOREA CoLtd is currently generating about 0.05 per unit of risk. If you would invest  332,293  in Youngbo Chemical Co on October 25, 2024 and sell it today you would earn a total of  57,207  from holding Youngbo Chemical Co or generate 17.22% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Youngbo Chemical Co  vs.  ENERGYMACHINERY KOREA CoLtd

Youngbo Chemical

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Youngbo Chemical Co are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Youngbo Chemical sustained solid returns over the last few months and may actually be approaching a breakup point.

ENERGYMACHINERY KOREA

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in ENERGYMACHINERY KOREA CoLtd are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, ENERGYMACHINERY KOREA may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Youngbo Chemical and ENERGYMACHINERY KOREA

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

The idea behind Youngbo Chemical Co and ENERGYMACHINERY KOREA CoLtd 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 Search module to search for actively traded equities including funds and ETFs from over 30 global markets.