Correlation Between Myoung Shin and Youl Chon

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

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

Diversification Opportunities for Myoung Shin and Youl Chon

0.69

Correlation Coefficient

Myoung Shin  Youl Chon

Poor diversification

The 3 months correlation between Myoung and Youl is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding Myoung Shin Industrial 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 Myoung Shin 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 Myoung Shin Industrial 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 Myoung Shin i.e., Myoung Shin and Youl Chon go up and down completely randomly.

Pair Corralation between Myoung Shin and Youl Chon

Assuming the 90 days trading horizon Myoung Shin Industrial is expected to generate 0.76 times more return on investment than Youl Chon. However, Myoung Shin Industrial is 1.31 times less risky than Youl Chon. It trades about -0.01 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  1,495,371  in Myoung Shin Industrial on September 14, 2024 and sell it today you would lose (414,371) from holding Myoung Shin Industrial or give up 27.71% of portfolio value over 90 days.

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

Myoung Shin Industrial  vs.  Youl Chon Chemical

Myoung Shin Industrial

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Myoung Shin Industrial has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Youl Chon Chemical

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Youl Chon Chemical has generated negative risk-adjusted returns adding no value to investors with long positions. 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 Myoung Shin and Youl Chon

The main advantage of trading using opposite Myoung Shin and Youl Chon positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Myoung Shin 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 Myoung Shin Industrial 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.