Correlation Between Youngbo Chemical and Namhae Chemical

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

Diversification Opportunities for Youngbo Chemical and Namhae Chemical

-0.11
  Correlation Coefficient

Good diversification

The 3 months correlation between Youngbo and Namhae is -0.11. Overlapping area represents the amount of risk that can be diversified away by holding Youngbo Chemical Co and Namhae Chemical in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Namhae Chemical and Youngbo Chemical 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 Youngbo Chemical Co are associated (or correlated) with Namhae Chemical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Namhae Chemical has no effect on the direction of Youngbo Chemical i.e., Youngbo Chemical and Namhae Chemical go up and down completely randomly.

Pair Corralation between Youngbo Chemical and Namhae Chemical

Assuming the 90 days trading horizon Youngbo Chemical Co is expected to generate 1.32 times more return on investment than Namhae Chemical. However, Youngbo Chemical is 1.32 times more volatile than Namhae Chemical. It trades about 0.05 of its potential returns per unit of risk. Namhae Chemical is currently generating about -0.02 per unit of risk. If you would invest  320,903  in Youngbo Chemical Co on October 25, 2024 and sell it today you would earn a total of  68,597  from holding Youngbo Chemical Co or generate 21.38% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthInsignificant
Accuracy100.0%
ValuesDaily Returns

Youngbo Chemical Co  vs.  Namhae Chemical

 Performance 
       Timeline  
Youngbo Chemical 

Risk-Adjusted Performance

16 of 100

 
Weak
 
Strong
Solid
Compared to the overall equity markets, risk-adjusted returns on investments in Youngbo Chemical Co are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Youngbo Chemical sustained solid returns over the last few months and may actually be approaching a breakup point.
Namhae Chemical 

Risk-Adjusted Performance

1 of 100

 
Weak
 
Strong
Weak
Compared to the overall equity markets, risk-adjusted returns on investments in Namhae Chemical are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Namhae Chemical is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Youngbo Chemical and Namhae Chemical Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Youngbo Chemical and Namhae Chemical

The main advantage of trading using opposite Youngbo Chemical and Namhae Chemical positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Youngbo Chemical position performs unexpectedly, Namhae 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 Namhae Chemical will offset losses from the drop in Namhae Chemical's long position.
The idea behind Youngbo Chemical Co and Namhae Chemical 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 Portfolio File Import module to quickly import all of your third-party portfolios from your local drive in csv format.

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