Correlation Between Microfriend and Pyung Hwa

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

By analyzing existing cross correlation between Microfriend and Pyung Hwa Industrial, you can compare the effects of market volatilities on Microfriend and Pyung Hwa 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 Microfriend with a short position of Pyung Hwa. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microfriend and Pyung Hwa.

Diversification Opportunities for Microfriend and Pyung Hwa

0.2

Correlation Coefficient

Microfriend  Pyung Hwa

Modest diversification

The 3 months correlation between Microfriend and Pyung is 0.2. Overlapping area represents the amount of risk that can be diversified away by holding Microfriend and Pyung Hwa Industrial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pyung Hwa Industrial and Microfriend 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 Microfriend are associated (or correlated) with Pyung Hwa. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pyung Hwa Industrial has no effect on the direction of Microfriend i.e., Microfriend and Pyung Hwa go up and down completely randomly.

Pair Corralation between Microfriend and Pyung Hwa

Assuming the 90 days trading horizon Microfriend is expected to generate 16.89 times less return on investment than Pyung Hwa. But when comparing it to its historical volatility, Microfriend is 1.66 times less risky than Pyung Hwa. It trades about 0.01 of its potential returns per unit of risk. Pyung Hwa Industrial is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest  88,200  in Pyung Hwa Industrial on December 1, 2024 and sell it today you would earn a total of  42,800  from holding Pyung Hwa Industrial or generate 48.53% return on investment over 90 days.

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

Microfriend  vs.  Pyung Hwa Industrial

Microfriend

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Microfriend are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Microfriend is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pyung Hwa Industrial

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Pyung Hwa Industrial are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Pyung Hwa sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Microfriend and Pyung Hwa

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

The idea behind Microfriend and Pyung Hwa Industrial 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.