Correlation Between ENERGYMACHINERY KOREA and IQuest

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

Diversification Opportunities for ENERGYMACHINERY KOREA and IQuest

-0.24

Correlation Coefficient

ENERGYMACHINERY KOREA  IQuest

Very good diversification

The 3 months correlation between ENERGYMACHINERY and IQuest is -0.24. Overlapping area represents the amount of risk that can be diversified away by holding ENERGYMACHINERY KOREA CoLtd and IQuest Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on IQuest 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 IQuest. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of IQuest has no effect on the direction of ENERGYMACHINERY KOREA i.e., ENERGYMACHINERY KOREA and IQuest go up and down completely randomly.

Pair Corralation between ENERGYMACHINERY KOREA and IQuest

Assuming the 90 days trading horizon ENERGYMACHINERY KOREA is expected to generate 1.37 times less return on investment than IQuest. But when comparing it to its historical volatility, ENERGYMACHINERY KOREA CoLtd is 1.1 times less risky than IQuest. It trades about 0.07 of its potential returns per unit of risk. IQuest Co is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  216,386  in IQuest Co on October 7, 2024 and sell it today you would earn a total of  21,614  from holding IQuest Co or generate 9.99% return on investment over 90 days.

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

ENERGYMACHINERY KOREA CoLtd  vs.  IQuest Co

ENERGYMACHINERY KOREA

Risk-Adjusted Performance

0 of 100

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.

IQuest

Risk-Adjusted Performance

3 of 100

Insignificant

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

Pair Trading with ENERGYMACHINERY KOREA and IQuest

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

The idea behind ENERGYMACHINERY KOREA CoLtd and IQuest 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.