Correlation Between Youngchang Chemical and Korea Aerospace

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

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

Diversification Opportunities for Youngchang Chemical and Korea Aerospace

-0.68

Correlation Coefficient

Youngchang Chemical  Korea Aerospace

Excellent diversification

The 3 months correlation between Youngchang and Korea is -0.68. Overlapping area represents the amount of risk that can be diversified away by holding Youngchang Chemical Co and Korea Aerospace Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Korea Aerospace Indu and Youngchang 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 Youngchang Chemical Co are associated (or correlated) with Korea Aerospace. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Korea Aerospace Indu has no effect on the direction of Youngchang Chemical i.e., Youngchang Chemical and Korea Aerospace go up and down completely randomly.

Pair Corralation between Youngchang Chemical and Korea Aerospace

Assuming the 90 days trading horizon Youngchang Chemical Co is expected to under-perform the Korea Aerospace. In addition to that, Youngchang Chemical is 1.9 times more volatile than Korea Aerospace Industries. It trades about -0.01 of its total potential returns per unit of risk. Korea Aerospace Industries is currently generating about 0.09 per unit of volatility. If you would invest  5,380,000  in Korea Aerospace Industries on August 31, 2024 and sell it today you would earn a total of  640,000  from holding Korea Aerospace Industries or generate 11.9% return on investment over 90 days.

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

Youngchang Chemical Co  vs.  Korea Aerospace Industries

Youngchang Chemical

Risk-Adjusted Performance

0 of 100

Very Weak

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

Korea Aerospace Indu

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Korea Aerospace Industries are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Korea Aerospace sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Youngchang Chemical and Korea Aerospace

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

The idea behind Youngchang Chemical Co and Korea Aerospace Industries 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.