Correlation Between Korea Petro and Youl Chon
Can any of the company-specific risk be diversified away by investing in both Korea Petro 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 Korea Petro and Youl Chon into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Korea Petro Chemical and Youl Chon Chemical, you can compare the effects of market volatilities on Korea Petro 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 Korea Petro with a short position of Youl Chon. Check out your portfolio center. Please also check ongoing floating volatility patterns of Korea Petro and Youl Chon.
Diversification Opportunities for Korea Petro and Youl Chon
0.68 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Korea and Youl is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding Korea Petro Chemical 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 Korea Petro 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 Korea Petro Chemical 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 Korea Petro i.e., Korea Petro and Youl Chon go up and down completely randomly.
Pair Corralation between Korea Petro and Youl Chon
Assuming the 90 days trading horizon Korea Petro is expected to generate 3.08 times less return on investment than Youl Chon. But when comparing it to its historical volatility, Korea Petro Chemical is 1.73 times less risky than Youl Chon. It trades about 0.24 of its potential returns per unit of risk. Youl Chon Chemical is currently generating about 0.42 of returns per unit of risk over similar time horizon. If you would invest 2,150,000 in Youl Chon Chemical on November 4, 2024 and sell it today you would earn a total of 910,000 from holding Youl Chon Chemical or generate 42.33% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Korea Petro Chemical vs. Youl Chon Chemical
Performance |
| Timeline |
| Korea Petro Chemical |
| Youl Chon Chemical |
Korea Petro and Youl Chon Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Korea Petro and Youl Chon
The main advantage of trading using opposite Korea Petro and Youl Chon positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Korea Petro 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.| Korea Petro vs. Samyoung Electronics Co | Korea Petro vs. Daewoo Electronic Components | Korea Petro vs. Guyoung Technology Co | Korea Petro vs. Seers Technology |
| Youl Chon vs. BIT Computer Co | Youl Chon vs. Nable Communications | Youl Chon vs. Inzi Display CoLtd | Youl Chon vs. Daejoo Electronic Materials |
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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