Correlation Between Jin Air and Youl Chon

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

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

Diversification Opportunities for Jin Air and Youl Chon

-0.06

Correlation Coefficient

Jin Air  Youl Chon

Good diversification

The 3 months correlation between Jin and Youl is -0.06. Overlapping area represents the amount of risk that can be diversified away by holding Jin Air Co and Youl Chon Chemical in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Youl Chon Chemical and Jin Air 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 Jin Air Co are associated (or correlated) with Youl Chon. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Youl Chon Chemical has no effect on the direction of Jin Air i.e., Jin Air and Youl Chon go up and down completely randomly.

Pair Corralation between Jin Air and Youl Chon

Assuming the 90 days trading horizon Jin Air Co is expected to under-perform the Youl Chon. But the stock apears to be less risky and, when comparing its historical volatility, Jin Air Co is 3.81 times less risky than Youl Chon. The stock trades about -0.02 of its potential returns per unit of risk. The Youl Chon Chemical is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  2,070,000  in Youl Chon Chemical on December 30, 2024 and sell it today you would earn a total of  650,000  from holding Youl Chon Chemical or generate 31.4% return on investment over 90 days.

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

Jin Air Co  vs.  Youl Chon Chemical

Jin Air

Risk-Adjusted Performance

Very Weak

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

Youl Chon Chemical

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Youl Chon Chemical are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Youl Chon sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Jin Air and Youl Chon

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

The idea behind Jin Air Co and Youl Chon Chemical 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 Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.