Correlation Between Eternal Materials and Yung Chi
Can any of the company-specific risk be diversified away by investing in both Eternal Materials and Yung Chi 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 Eternal Materials and Yung Chi into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Eternal Materials Co and Yung Chi Paint, you can compare the effects of market volatilities on Eternal Materials and Yung Chi 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 Eternal Materials with a short position of Yung Chi. Check out your portfolio center. Please also check ongoing floating volatility patterns of Eternal Materials and Yung Chi.
Diversification Opportunities for Eternal Materials and Yung Chi
0.93 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Eternal and Yung is 0.93. Overlapping area represents the amount of risk that can be diversified away by holding Eternal Materials Co and Yung Chi Paint in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Yung Chi Paint and Eternal Materials 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 Eternal Materials Co are associated (or correlated) with Yung Chi. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Yung Chi Paint has no effect on the direction of Eternal Materials i.e., Eternal Materials and Yung Chi go up and down completely randomly.
Pair Corralation between Eternal Materials and Yung Chi
Assuming the 90 days trading horizon Eternal Materials Co is expected to generate 2.16 times more return on investment than Yung Chi. However, Eternal Materials is 2.16 times more volatile than Yung Chi Paint. It trades about 0.13 of its potential returns per unit of risk. Yung Chi Paint is currently generating about -0.01 per unit of risk. If you would invest 2,770 in Eternal Materials Co on November 3, 2024 and sell it today you would earn a total of 65.00 from holding Eternal Materials Co or generate 2.35% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Eternal Materials Co vs. Yung Chi Paint
Performance |
| Timeline |
| Eternal Materials |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
| Yung Chi Paint |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
Eternal Materials and Yung Chi Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Eternal Materials and Yung Chi
The main advantage of trading using opposite Eternal Materials and Yung Chi positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Eternal Materials position performs unexpectedly, Yung Chi 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 Yung Chi will offset losses from the drop in Yung Chi's long position.The idea behind Eternal Materials Co and Yung Chi Paint 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.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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.
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