Correlation Between Youngchang Chemical and Eugene Technology

Can any of the company-specific risk be diversified away by investing in both Youngchang Chemical and Eugene 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 Youngchang Chemical and Eugene Technology 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 Eugene Technology CoLtd, you can compare the effects of market volatilities on Youngchang Chemical and Eugene 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 Youngchang Chemical with a short position of Eugene Technology. Check out your portfolio center. Please also check ongoing floating volatility patterns of Youngchang Chemical and Eugene Technology.

Diversification Opportunities for Youngchang Chemical and Eugene Technology

0.65

Correlation Coefficient

Youngchang Chemical  Eugene Technology

Poor diversification

The 3 months correlation between Youngchang and Eugene is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding Youngchang Chemical Co and Eugene Technology CoLtd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Eugene Technology CoLtd 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 Eugene Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Eugene Technology CoLtd has no effect on the direction of Youngchang Chemical i.e., Youngchang Chemical and Eugene Technology go up and down completely randomly.

Pair Corralation between Youngchang Chemical and Eugene Technology

Assuming the 90 days trading horizon Youngchang Chemical Co is expected to generate 1.51 times more return on investment than Eugene Technology. However, Youngchang Chemical is 1.51 times more volatile than Eugene Technology CoLtd. It trades about 0.45 of its potential returns per unit of risk. Eugene Technology CoLtd is currently generating about 0.15 per unit of risk. If you would invest  1,310,000  in Youngchang Chemical Co on October 15, 2024 and sell it today you would earn a total of  695,000  from holding Youngchang Chemical Co or generate 53.05% 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.  Eugene Technology CoLtd

Youngchang Chemical

Risk-Adjusted Performance

3 of 100

Insignificant

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

Eugene Technology CoLtd

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Youngchang Chemical and Eugene Technology

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

The idea behind Youngchang Chemical Co and Eugene Technology CoLtd 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.