Correlation Between Sung Bo and Youngchang Chemical

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Can any of the company-specific risk be diversified away by investing in both Sung Bo and Youngchang 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 Sung Bo and Youngchang Chemical into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Sung Bo Chemicals and Youngchang Chemical Co, you can compare the effects of market volatilities on Sung Bo and Youngchang 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 Sung Bo with a short position of Youngchang Chemical. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sung Bo and Youngchang Chemical.

Diversification Opportunities for Sung Bo and Youngchang Chemical

0.56
  Correlation Coefficient

Very weak diversification

The 3 months correlation between Sung and Youngchang is 0.56. Overlapping area represents the amount of risk that can be diversified away by holding Sung Bo Chemicals and Youngchang Chemical Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Youngchang Chemical and Sung Bo 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 Sung Bo Chemicals are associated (or correlated) with Youngchang Chemical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Youngchang Chemical has no effect on the direction of Sung Bo i.e., Sung Bo and Youngchang Chemical go up and down completely randomly.

Pair Corralation between Sung Bo and Youngchang Chemical

Assuming the 90 days trading horizon Sung Bo Chemicals is expected to under-perform the Youngchang Chemical. But the stock apears to be less risky and, when comparing its historical volatility, Sung Bo Chemicals is 10.94 times less risky than Youngchang Chemical. The stock trades about -0.09 of its potential returns per unit of risk. The Youngchang Chemical Co is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  2,115,000  in Youngchang Chemical Co on November 28, 2024 and sell it today you would earn a total of  340,000  from holding Youngchang Chemical Co or generate 16.08% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthWeak
Accuracy100.0%
ValuesDaily Returns

Sung Bo Chemicals  vs.  Youngchang Chemical Co

 Performance 
       Timeline  
Sung Bo Chemicals 

Risk-Adjusted Performance

Insignificant

 
Weak
 
Strong
Compared to the overall equity markets, risk-adjusted returns on investments in Sung Bo Chemicals are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Sung Bo is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.
Youngchang Chemical 

Risk-Adjusted Performance

Good

 
Weak
 
Strong
Compared to the overall equity markets, risk-adjusted returns on investments in Youngchang Chemical Co are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Youngchang Chemical sustained solid returns over the last few months and may actually be approaching a breakup point.

Sung Bo and Youngchang Chemical Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Sung Bo and Youngchang Chemical

The main advantage of trading using opposite Sung Bo and Youngchang Chemical positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sung Bo position performs unexpectedly, Youngchang 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 Youngchang Chemical will offset losses from the drop in Youngchang Chemical's long position.
The idea behind Sung Bo Chemicals and Youngchang 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.
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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 Stocks Directory module to find actively traded stocks across global markets.

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