Correlation Between EV Advanced and Youngchang Chemical

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

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

Diversification Opportunities for EV Advanced and Youngchang Chemical

0.26

Correlation Coefficient

EV Advanced  Youngchang Chemical

Modest diversification

The 3 months correlation between 131400 and Youngchang is 0.26. Overlapping area represents the amount of risk that can be diversified away by holding EV Advanced Material and Youngchang Chemical Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Youngchang Chemical and EV Advanced 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 EV Advanced Material are associated (or correlated) with Youngchang Chemical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Youngchang Chemical has no effect on the direction of EV Advanced i.e., EV Advanced and Youngchang Chemical go up and down completely randomly.

Pair Corralation between EV Advanced and Youngchang Chemical

Assuming the 90 days trading horizon EV Advanced Material is expected to under-perform the Youngchang Chemical. But the stock apears to be less risky and, when comparing its historical volatility, EV Advanced Material is 1.22 times less risky than Youngchang Chemical. The stock trades about -0.03 of its potential returns per unit of risk. The Youngchang Chemical Co is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  1,695,000  in Youngchang Chemical Co on October 22, 2024 and sell it today you would earn a total of  455,000  from holding Youngchang Chemical Co or generate 26.84% return on investment over 90 days.

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

EV Advanced Material  vs.  Youngchang Chemical Co

EV Advanced Material

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days EV Advanced Material 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.

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.

Pair Trading with EV Advanced and Youngchang Chemical

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

The idea behind EV Advanced Material and Youngchang Chemical Co 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.