Correlation Between IL Science and Cheryong Industrial

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

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

Diversification Opportunities for IL Science and Cheryong Industrial

0.63

Correlation Coefficient

IL Science  Cheryong Industrial

Poor diversification

The 3 months correlation between 307180 and Cheryong is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding IL Science Co and Cheryong Industrial CoLtd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cheryong Industrial CoLtd and IL Science 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 IL Science Co are associated (or correlated) with Cheryong Industrial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cheryong Industrial CoLtd has no effect on the direction of IL Science i.e., IL Science and Cheryong Industrial go up and down completely randomly.

Pair Corralation between IL Science and Cheryong Industrial

Assuming the 90 days trading horizon IL Science Co is expected to generate 0.74 times more return on investment than Cheryong Industrial. However, IL Science Co is 1.36 times less risky than Cheryong Industrial. It trades about -0.12 of its potential returns per unit of risk. Cheryong Industrial CoLtd is currently generating about -0.15 per unit of risk. If you would invest  344,500  in IL Science Co on August 31, 2024 and sell it today you would lose (60,000) from holding IL Science Co or give up 17.42% of portfolio value over 90 days.

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

IL Science Co  vs.  Cheryong Industrial CoLtd

IL Science

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days IL Science Co has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in December 2024. The current disturbance may also be a sign of long term up-swing for the company investors.

Cheryong Industrial CoLtd

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Cheryong Industrial CoLtd has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in December 2024. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with IL Science and Cheryong Industrial

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

The idea behind IL Science Co and Cheryong Industrial CoLtd 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.