Correlation Between ENERGYMACHINERY KOREA and NewFlex Technology

Can any of the company-specific risk be diversified away by investing in both ENERGYMACHINERY KOREA and NewFlex Technology 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 ENERGYMACHINERY KOREA and NewFlex Technology into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between ENERGYMACHINERY KOREA CoLtd and NewFlex Technology Co, you can compare the effects of market volatilities on ENERGYMACHINERY KOREA and NewFlex Technology 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 ENERGYMACHINERY KOREA with a short position of NewFlex Technology. Check out your portfolio center. Please also check ongoing floating volatility patterns of ENERGYMACHINERY KOREA and NewFlex Technology.

Diversification Opportunities for ENERGYMACHINERY KOREA and NewFlex Technology

0.35

Correlation Coefficient

ENERGYMACHINERY KOREA  NewFlex Technology

Weak diversification

The 3 months correlation between ENERGYMACHINERY and NewFlex is 0.35. Overlapping area represents the amount of risk that can be diversified away by holding ENERGYMACHINERY KOREA CoLtd and NewFlex Technology Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NewFlex Technology and ENERGYMACHINERY KOREA 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 ENERGYMACHINERY KOREA CoLtd are associated (or correlated) with NewFlex Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NewFlex Technology has no effect on the direction of ENERGYMACHINERY KOREA i.e., ENERGYMACHINERY KOREA and NewFlex Technology go up and down completely randomly.

Pair Corralation between ENERGYMACHINERY KOREA and NewFlex Technology

Assuming the 90 days trading horizon ENERGYMACHINERY KOREA CoLtd is expected to generate 0.61 times more return on investment than NewFlex Technology. However, ENERGYMACHINERY KOREA CoLtd is 1.63 times less risky than NewFlex Technology. It trades about -0.05 of its potential returns per unit of risk. NewFlex Technology Co is currently generating about -0.12 per unit of risk. If you would invest  219,500  in ENERGYMACHINERY KOREA CoLtd on December 29, 2024 and sell it today you would lose (12,000) from holding ENERGYMACHINERY KOREA CoLtd or give up 5.47% of portfolio value over 90 days.

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

ENERGYMACHINERY KOREA CoLtd  vs.  NewFlex Technology Co

ENERGYMACHINERY KOREA

Risk-Adjusted Performance

Very Weak

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

NewFlex Technology

Risk-Adjusted Performance

Very Weak

Over the last 90 days NewFlex Technology Co 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 April 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with ENERGYMACHINERY KOREA and NewFlex Technology

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

The idea behind ENERGYMACHINERY KOREA CoLtd and NewFlex Technology 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 Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.