Correlation Between Youngchang Chemical and Digital Multimedia

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

Diversification Opportunities for Youngchang Chemical and Digital Multimedia

0.91

Correlation Coefficient

Youngchang Chemical  Digital Multimedia

Almost no diversification

The 3 months correlation between Youngchang and Digital is 0.91. Overlapping area represents the amount of risk that can be diversified away by holding Youngchang Chemical Co and Digital Multimedia Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Digital Multimedia 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 Digital Multimedia. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Digital Multimedia has no effect on the direction of Youngchang Chemical i.e., Youngchang Chemical and Digital Multimedia go up and down completely randomly.

Pair Corralation between Youngchang Chemical and Digital Multimedia

Assuming the 90 days trading horizon Youngchang Chemical Co is expected to generate 1.01 times more return on investment than Digital Multimedia. However, Youngchang Chemical is 1.01 times more volatile than Digital Multimedia Technology. It trades about -0.02 of its potential returns per unit of risk. Digital Multimedia Technology is currently generating about -0.03 per unit of risk. If you would invest  1,761,000  in Youngchang Chemical Co on October 10, 2024 and sell it today you would lose (155,000) from holding Youngchang Chemical Co or give up 8.8% of portfolio value over 90 days.

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

Youngchang Chemical Co  vs.  Digital Multimedia Technology

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.

Digital Multimedia

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Digital Multimedia Technology has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Youngchang Chemical and Digital Multimedia

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

The idea behind Youngchang Chemical Co and Digital Multimedia Technology 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.