Correlation Between CJ ENM and LEADCORP

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

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

Diversification Opportunities for CJ ENM and LEADCORP

0.83

Correlation Coefficient

CJ ENM  LEADCORP

Very poor diversification

The 3 months correlation between 035760 and LEADCORP is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding CJ ENM and The LEADCORP in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LEADCORP and CJ ENM 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 CJ ENM are associated (or correlated) with LEADCORP. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of LEADCORP has no effect on the direction of CJ ENM i.e., CJ ENM and LEADCORP go up and down completely randomly.

Pair Corralation between CJ ENM and LEADCORP

Assuming the 90 days trading horizon CJ ENM is expected to under-perform the LEADCORP. In addition to that, CJ ENM is 3.67 times more volatile than The LEADCORP. It trades about -0.05 of its total potential returns per unit of risk. The LEADCORP is currently generating about -0.13 per unit of volatility. If you would invest  450,500  in The LEADCORP on September 4, 2024 and sell it today you would lose (26,000) from holding The LEADCORP or give up 5.77% of portfolio value over 90 days.

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

CJ ENM  vs.  The LEADCORP

CJ ENM

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days CJ ENM 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.

LEADCORP

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days The LEADCORP has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, LEADCORP is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with CJ ENM and LEADCORP

The main advantage of trading using opposite CJ ENM and LEADCORP positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CJ ENM position performs unexpectedly, LEADCORP 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 LEADCORP will offset losses from the drop in LEADCORP's long position.

The idea behind CJ ENM and The LEADCORP 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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..