Correlation Between Tuksu Engineering and Youngbo Chemical

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

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

Diversification Opportunities for Tuksu Engineering and Youngbo Chemical

0.5

Correlation Coefficient

Tuksu Engineering  Youngbo Chemical

Very weak diversification

The 3 months correlation between Tuksu and Youngbo is 0.5. Overlapping area represents the amount of risk that can be diversified away by holding Tuksu Engineering Construction and Youngbo Chemical Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Youngbo Chemical and Tuksu Engineering 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 Tuksu Engineering ConstructionLtd 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 Tuksu Engineering i.e., Tuksu Engineering and Youngbo Chemical go up and down completely randomly.

Pair Corralation between Tuksu Engineering and Youngbo Chemical

Assuming the 90 days trading horizon Tuksu Engineering ConstructionLtd is expected to generate 3.68 times more return on investment than Youngbo Chemical. However, Tuksu Engineering is 3.68 times more volatile than Youngbo Chemical Co. It trades about 0.04 of its potential returns per unit of risk. Youngbo Chemical Co is currently generating about 0.09 per unit of risk. If you would invest  598,000  in Tuksu Engineering ConstructionLtd on September 25, 2024 and sell it today you would earn a total of  39,000  from holding Tuksu Engineering ConstructionLtd or generate 6.52% return on investment over 90 days.

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

Tuksu Engineering Construction  vs.  Youngbo Chemical Co

Tuksu Engineering

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Tuksu Engineering ConstructionLtd are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Tuksu Engineering may actually be approaching a critical reversion point that can send shares even higher in January 2025.

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 weak basic indicators, Youngbo Chemical may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Tuksu Engineering and Youngbo Chemical

The main advantage of trading using opposite Tuksu Engineering and Youngbo Chemical positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Tuksu Engineering 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 Tuksu Engineering ConstructionLtd 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.