Correlation Between Hansol Chemical and Youngbo Chemical

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

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

Diversification Opportunities for Hansol Chemical and Youngbo Chemical

-0.66

Correlation Coefficient

Hansol Chemical  Youngbo Chemical

Excellent diversification

The 3 months correlation between Hansol and Youngbo is -0.66. Overlapping area represents the amount of risk that can be diversified away by holding Hansol Chemical 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 Hansol 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 Hansol Chemical 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 Hansol Chemical i.e., Hansol Chemical and Youngbo Chemical go up and down completely randomly.

Pair Corralation between Hansol Chemical and Youngbo Chemical

Assuming the 90 days trading horizon Hansol Chemical Co is expected to under-perform the Youngbo Chemical. In addition to that, Hansol Chemical is 3.25 times more volatile than Youngbo Chemical Co. It trades about -0.13 of its total potential returns per unit of risk. Youngbo Chemical Co is currently generating about 0.09 per unit of volatility. If you would invest  340,000  in Youngbo Chemical Co on September 12, 2024 and sell it today you would earn a total of  16,500  from holding Youngbo Chemical Co or generate 4.85% return on investment over 90 days.

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

Hansol Chemical Co  vs.  Youngbo Chemical Co

Hansol Chemical

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Hansol Chemical Co has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Youngbo Chemical

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Youngbo Chemical Co are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Youngbo Chemical is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Hansol Chemical and Youngbo Chemical

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

The idea behind Hansol Chemical Co and Youngbo Chemical Co 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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.