Correlation Between FOODWELL and Youl Chon

Can any of the company-specific risk be diversified away by investing in both FOODWELL 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 FOODWELL and Youl Chon into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between FOODWELL Co and Youl Chon Chemical, you can compare the effects of market volatilities on FOODWELL 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 FOODWELL with a short position of Youl Chon. Check out your portfolio center. Please also check ongoing floating volatility patterns of FOODWELL and Youl Chon.

Diversification Opportunities for FOODWELL and Youl Chon

0.44

Correlation Coefficient

FOODWELL  Youl Chon

Very weak diversification

The 3 months correlation between FOODWELL and Youl is 0.44. Overlapping area represents the amount of risk that can be diversified away by holding FOODWELL Co 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 FOODWELL 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 FOODWELL Co 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 FOODWELL i.e., FOODWELL and Youl Chon go up and down completely randomly.

Pair Corralation between FOODWELL and Youl Chon

Assuming the 90 days trading horizon FOODWELL Co is expected to generate 0.46 times more return on investment than Youl Chon. However, FOODWELL Co is 2.2 times less risky than Youl Chon. It trades about 0.06 of its potential returns per unit of risk. Youl Chon Chemical is currently generating about 0.01 per unit of risk. If you would invest  484,500  in FOODWELL Co on September 4, 2024 and sell it today you would earn a total of  24,500  from holding FOODWELL Co or generate 5.06% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

FOODWELL Co  vs.  Youl Chon Chemical

FOODWELL

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in FOODWELL Co are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, FOODWELL is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Youl Chon Chemical

Risk-Adjusted Performance

1 of 100

Weak

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

Pair Trading with FOODWELL and Youl Chon

The main advantage of trading using opposite FOODWELL and Youl Chon positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if FOODWELL 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.

The idea behind FOODWELL Co and Youl Chon 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.