Correlation Between Cheryong Industrial and Nature

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

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

Diversification Opportunities for Cheryong Industrial and Nature

0.25

Correlation Coefficient

Cheryong Industrial  Nature

Modest diversification

The 3 months correlation between Cheryong and Nature is 0.25. Overlapping area represents the amount of risk that can be diversified away by holding Cheryong Industrial CoLtd and Nature and Environment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nature and Environment and Cheryong Industrial 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 Cheryong Industrial CoLtd are associated (or correlated) with Nature. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nature and Environment has no effect on the direction of Cheryong Industrial i.e., Cheryong Industrial and Nature go up and down completely randomly.

Pair Corralation between Cheryong Industrial and Nature

Assuming the 90 days trading horizon Cheryong Industrial CoLtd is expected to generate 2.17 times more return on investment than Nature. However, Cheryong Industrial is 2.17 times more volatile than Nature and Environment. It trades about 0.13 of its potential returns per unit of risk. Nature and Environment is currently generating about -0.02 per unit of risk. If you would invest  496,091  in Cheryong Industrial CoLtd on November 29, 2024 and sell it today you would earn a total of  175,909  from holding Cheryong Industrial CoLtd or generate 35.46% return on investment over 90 days.

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

Cheryong Industrial CoLtd  vs.  Nature and Environment

Cheryong Industrial CoLtd

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Cheryong Industrial CoLtd are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Cheryong Industrial sustained solid returns over the last few months and may actually be approaching a breakup point.

Nature and Environment

Risk-Adjusted Performance

Very Weak

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

Pair Trading with Cheryong Industrial and Nature

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

The idea behind Cheryong Industrial CoLtd and Nature and Environment 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 Portfolio Dashboard module to portfolio dashboard that provides centralized access to all your investments.