Correlation Between Alton Sports and ENERGYMACHINERY KOREA

Can any of the company-specific risk be diversified away by investing in both Alton Sports and ENERGYMACHINERY KOREA 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 Alton Sports and ENERGYMACHINERY KOREA into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Alton Sports CoLtd and ENERGYMACHINERY KOREA CoLtd, you can compare the effects of market volatilities on Alton Sports and ENERGYMACHINERY KOREA 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 Alton Sports with a short position of ENERGYMACHINERY KOREA. Check out your portfolio center. Please also check ongoing floating volatility patterns of Alton Sports and ENERGYMACHINERY KOREA.

Diversification Opportunities for Alton Sports and ENERGYMACHINERY KOREA

0.63

Correlation Coefficient

Alton Sports  ENERGYMACHINERY KOREA

Poor diversification

The 3 months correlation between Alton and ENERGYMACHINERY is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding Alton Sports CoLtd and ENERGYMACHINERY KOREA CoLtd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ENERGYMACHINERY KOREA and Alton Sports 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 Alton Sports CoLtd are associated (or correlated) with ENERGYMACHINERY KOREA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ENERGYMACHINERY KOREA has no effect on the direction of Alton Sports i.e., Alton Sports and ENERGYMACHINERY KOREA go up and down completely randomly.

Pair Corralation between Alton Sports and ENERGYMACHINERY KOREA

Assuming the 90 days trading horizon Alton Sports CoLtd is expected to under-perform the ENERGYMACHINERY KOREA. But the stock apears to be less risky and, when comparing its historical volatility, Alton Sports CoLtd is 1.66 times less risky than ENERGYMACHINERY KOREA. The stock trades about -0.05 of its potential returns per unit of risk. The ENERGYMACHINERY KOREA CoLtd is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  223,000  in ENERGYMACHINERY KOREA CoLtd on October 24, 2024 and sell it today you would earn a total of  12,000  from holding ENERGYMACHINERY KOREA CoLtd or generate 5.38% return on investment over 90 days.

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

Alton Sports CoLtd  vs.  ENERGYMACHINERY KOREA CoLtd

Alton Sports CoLtd

Risk-Adjusted Performance

0 of 100

Very Weak

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

ENERGYMACHINERY KOREA

Risk-Adjusted Performance

3 of 100

Insignificant

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

Pair Trading with Alton Sports and ENERGYMACHINERY KOREA

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

The idea behind Alton Sports CoLtd and ENERGYMACHINERY KOREA 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.