Correlation Between Youngchang Chemical and Jeju Semiconductor

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

Diversification Opportunities for Youngchang Chemical and Jeju Semiconductor

0.69

Correlation Coefficient

Youngchang Chemical  Jeju Semiconductor

Poor diversification

The 3 months correlation between Youngchang and Jeju is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding Youngchang Chemical Co and Jeju Semiconductor Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Jeju Semiconductor Corp 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 Jeju Semiconductor. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Jeju Semiconductor Corp has no effect on the direction of Youngchang Chemical i.e., Youngchang Chemical and Jeju Semiconductor go up and down completely randomly.

Pair Corralation between Youngchang Chemical and Jeju Semiconductor

Assuming the 90 days trading horizon Youngchang Chemical Co is expected to generate 0.8 times more return on investment than Jeju Semiconductor. However, Youngchang Chemical Co is 1.26 times less risky than Jeju Semiconductor. It trades about 0.47 of its potential returns per unit of risk. Jeju Semiconductor Corp is currently generating about 0.3 per unit of risk. If you would invest  1,308,000  in Youngchang Chemical Co on October 27, 2024 and sell it today you would earn a total of  847,000  from holding Youngchang Chemical Co or generate 64.76% return on investment over 90 days.

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

Youngchang Chemical Co  vs.  Jeju Semiconductor Corp

Youngchang Chemical

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Youngchang Chemical Co are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Youngchang Chemical sustained solid returns over the last few months and may actually be approaching a breakup point.

Jeju Semiconductor Corp

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Jeju Semiconductor Corp are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Jeju Semiconductor sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Youngchang Chemical and Jeju Semiconductor

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

The idea behind Youngchang Chemical Co and Jeju Semiconductor Corp 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.