Correlation Between Yageo Corp and Stark Technology

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

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

Diversification Opportunities for Yageo Corp and Stark Technology

0.75

Correlation Coefficient

Yageo Corp  Stark Technology

Poor diversification

The 3 months correlation between Yageo and Stark is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Yageo Corp and Stark Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Stark Technology and Yageo Corp 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 Yageo Corp are associated (or correlated) with Stark Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Stark Technology has no effect on the direction of Yageo Corp i.e., Yageo Corp and Stark Technology go up and down completely randomly.

Pair Corralation between Yageo Corp and Stark Technology

Assuming the 90 days trading horizon Yageo Corp is expected to generate 12.0 times less return on investment than Stark Technology. But when comparing it to its historical volatility, Yageo Corp is 1.07 times less risky than Stark Technology. It trades about 0.02 of its potential returns per unit of risk. Stark Technology is currently generating about 0.24 of returns per unit of risk over similar time horizon. If you would invest  12,600  in Stark Technology on December 4, 2024 and sell it today you would earn a total of  3,750  from holding Stark Technology or generate 29.76% return on investment over 90 days.

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

Yageo Corp  vs.  Stark Technology

Yageo Corp

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Yageo Corp are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, Yageo Corp is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Stark Technology

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Stark Technology are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Stark Technology showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Yageo Corp and Stark Technology

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

The idea behind Yageo Corp and Stark 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.