Correlation Between Top Material and ENERGYMACHINERY KOREA

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

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

Diversification Opportunities for Top Material and ENERGYMACHINERY KOREA

-0.04

Correlation Coefficient

Top Material  ENERGYMACHINERY KOREA

Good diversification

The 3 months correlation between Top and ENERGYMACHINERY is -0.04. Overlapping area represents the amount of risk that can be diversified away by holding Top Material Co and ENERGYMACHINERY KOREA CoLtd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ENERGYMACHINERY KOREA and Top Material 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 Top Material Co are associated (or correlated) with ENERGYMACHINERY KOREA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ENERGYMACHINERY KOREA has no effect on the direction of Top Material i.e., Top Material and ENERGYMACHINERY KOREA go up and down completely randomly.

Pair Corralation between Top Material and ENERGYMACHINERY KOREA

Assuming the 90 days trading horizon Top Material Co is expected to generate 3.11 times more return on investment than ENERGYMACHINERY KOREA. However, Top Material is 3.11 times more volatile than ENERGYMACHINERY KOREA CoLtd. It trades about 0.08 of its potential returns per unit of risk. ENERGYMACHINERY KOREA CoLtd is currently generating about -0.05 per unit of risk. If you would invest  2,600,000  in Top Material Co on December 27, 2024 and sell it today you would earn a total of  465,000  from holding Top Material Co or generate 17.88% return on investment over 90 days.

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

Top Material Co  vs.  ENERGYMACHINERY KOREA CoLtd

Top Material

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Top Material Co are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Top Material sustained solid returns over the last few months and may actually be approaching a breakup point.

ENERGYMACHINERY KOREA

Risk-Adjusted Performance

Very Weak

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

Pair Trading with Top Material and ENERGYMACHINERY KOREA

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

The idea behind Top Material Co and ENERGYMACHINERY KOREA 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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.