Correlation Between Dongil Metal and Youngbo Chemical

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

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

Diversification Opportunities for Dongil Metal and Youngbo Chemical

0.29

Correlation Coefficient

Dongil Metal  Youngbo Chemical

Modest diversification

The 3 months correlation between Dongil and Youngbo is 0.29. Overlapping area represents the amount of risk that can be diversified away by holding Dongil Metal Co and Youngbo Chemical Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Youngbo Chemical and Dongil Metal 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 Dongil Metal Co are associated (or correlated) with Youngbo Chemical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Youngbo Chemical has no effect on the direction of Dongil Metal i.e., Dongil Metal and Youngbo Chemical go up and down completely randomly.

Pair Corralation between Dongil Metal and Youngbo Chemical

Assuming the 90 days trading horizon Dongil Metal is expected to generate 2.7 times less return on investment than Youngbo Chemical. In addition to that, Dongil Metal is 1.14 times more volatile than Youngbo Chemical Co. It trades about 0.07 of its total potential returns per unit of risk. Youngbo Chemical Co is currently generating about 0.2 per unit of volatility. If you would invest  354,479  in Youngbo Chemical Co on December 24, 2024 and sell it today you would earn a total of  84,521  from holding Youngbo Chemical Co or generate 23.84% return on investment over 90 days.

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

Dongil Metal Co  vs.  Youngbo Chemical Co

Dongil Metal

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Dongil Metal Co are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Dongil Metal may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Youngbo Chemical

Risk-Adjusted Performance

Good

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.

Pair Trading with Dongil Metal and Youngbo Chemical

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

The idea behind Dongil Metal Co and Youngbo Chemical 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.

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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.