Correlation Between Formetal and Youngbo Chemical
Can any of the company-specific risk be diversified away by investing in both Formetal and Youngbo 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 Formetal and Youngbo Chemical into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Formetal Co and Youngbo Chemical Co, you can compare the effects of market volatilities on Formetal and Youngbo 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 Formetal with a short position of Youngbo Chemical. Check out your portfolio center. Please also check ongoing floating volatility patterns of Formetal and Youngbo Chemical.
Diversification Opportunities for Formetal and Youngbo Chemical
0.88 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Formetal and Youngbo is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding Formetal Co and Youngbo Chemical Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Youngbo Chemical and Formetal 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 Formetal Co are associated (or correlated) with Youngbo Chemical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Youngbo Chemical has no effect on the direction of Formetal i.e., Formetal and Youngbo Chemical go up and down completely randomly.
Pair Corralation between Formetal and Youngbo Chemical
Assuming the 90 days trading horizon Formetal Co is expected to generate 1.76 times more return on investment than Youngbo Chemical. However, Formetal is 1.76 times more volatile than Youngbo Chemical Co. It trades about 0.03 of its potential returns per unit of risk. Youngbo Chemical Co is currently generating about 0.03 per unit of risk. If you would invest 322,020 in Formetal Co on October 27, 2024 and sell it today you would earn a total of 58,480 from holding Formetal Co or generate 18.16% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Formetal Co vs. Youngbo Chemical Co
Performance |
| Timeline |
| Formetal |
| Youngbo Chemical |
Formetal and Youngbo Chemical Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Formetal and Youngbo Chemical
The main advantage of trading using opposite Formetal and Youngbo Chemical positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Formetal position performs unexpectedly, Youngbo 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 Youngbo Chemical will offset losses from the drop in Youngbo Chemical's long position.| Formetal vs. SBI Investment KOREA | Formetal vs. DSC Investment | Formetal vs. E Investment Development | Formetal vs. Neungyule Education |
| Youngbo Chemical vs. LG Household Healthcare | Youngbo Chemical vs. Hannong Chemicals | Youngbo Chemical vs. Neungyule Education | Youngbo Chemical vs. Daejung Chemicals Metals |
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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.
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