Correlation Between Dongbang Transport and Youngchang Chemical
Can any of the company-specific risk be diversified away by investing in both Dongbang Transport 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 Dongbang Transport and Youngchang Chemical into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Dongbang Transport Logistics and Youngchang Chemical Co, you can compare the effects of market volatilities on Dongbang Transport 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 Dongbang Transport with a short position of Youngchang Chemical. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dongbang Transport and Youngchang Chemical.
Diversification Opportunities for Dongbang Transport and Youngchang Chemical
0.67 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Dongbang and Youngchang is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding Dongbang Transport Logistics and Youngchang Chemical Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Youngchang Chemical and Dongbang Transport 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 Dongbang Transport Logistics 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 Dongbang Transport i.e., Dongbang Transport and Youngchang Chemical go up and down completely randomly.
Pair Corralation between Dongbang Transport and Youngchang Chemical
Assuming the 90 days trading horizon Dongbang Transport Logistics is expected to generate 0.86 times more return on investment than Youngchang Chemical. However, Dongbang Transport Logistics is 1.16 times less risky than Youngchang Chemical. It trades about -0.12 of its potential returns per unit of risk. Youngchang Chemical Co is currently generating about -0.2 per unit of risk. If you would invest 225,000 in Dongbang Transport Logistics on September 12, 2024 and sell it today you would lose (21,000) from holding Dongbang Transport Logistics or give up 9.33% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Dongbang Transport Logistics vs. Youngchang Chemical Co
Performance |
| Timeline |
| Dongbang Transport |
| Youngchang Chemical |
Dongbang Transport and Youngchang Chemical Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Dongbang Transport and Youngchang Chemical
The main advantage of trading using opposite Dongbang Transport and Youngchang Chemical positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dongbang Transport 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.| Dongbang Transport vs. Samsung Electronics Co | Dongbang Transport vs. Samsung Electronics Co | Dongbang Transport vs. SK Hynix | Dongbang Transport vs. POSCO Holdings |
| Youngchang Chemical vs. LG Chem | Youngchang Chemical vs. Chunbo Co | Youngchang Chemical vs. DukSan Neolux CoLtd | Youngchang Chemical vs. Hyosung Chemical Corp |
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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.
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