Correlation Between DSC Investment and Youngbo Chemical

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

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

Diversification Opportunities for DSC Investment and Youngbo Chemical

0.46

Correlation Coefficient

DSC Investment  Youngbo Chemical

Very weak diversification

The 3 months correlation between DSC and Youngbo is 0.46. Overlapping area represents the amount of risk that can be diversified away by holding DSC Investment and Youngbo Chemical Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Youngbo Chemical and DSC Investment 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 DSC Investment are associated (or correlated) with Youngbo Chemical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Youngbo Chemical has no effect on the direction of DSC Investment i.e., DSC Investment and Youngbo Chemical go up and down completely randomly.

Pair Corralation between DSC Investment and Youngbo Chemical

Assuming the 90 days trading horizon DSC Investment is expected to generate 1.23 times less return on investment than Youngbo Chemical. In addition to that, DSC Investment is 1.85 times more volatile than Youngbo Chemical Co. It trades about 0.04 of its total potential returns per unit of risk. Youngbo Chemical Co is currently generating about 0.09 per unit of volatility. If you would invest  337,223  in Youngbo Chemical Co on October 4, 2024 and sell it today you would earn a total of  18,777  from holding Youngbo Chemical Co or generate 5.57% return on investment over 90 days.

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

DSC Investment  vs.  Youngbo Chemical Co

DSC Investment

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in DSC Investment are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, DSC Investment is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Youngbo Chemical

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Youngbo Chemical Co are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Youngbo Chemical is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with DSC Investment and Youngbo Chemical

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

The idea behind DSC Investment and Youngbo 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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.