Correlation Between Young Poong and Seoam Machinery

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

By analyzing existing cross correlation between Young Poong Precision and Seoam Machinery Industry, you can compare the effects of market volatilities on Young Poong and Seoam Machinery 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 Young Poong with a short position of Seoam Machinery. Check out your portfolio center. Please also check ongoing floating volatility patterns of Young Poong and Seoam Machinery.

Diversification Opportunities for Young Poong and Seoam Machinery

0.04

Correlation Coefficient

Young Poong  Seoam Machinery

Significant diversification

The 3 months correlation between Young and Seoam is 0.04. Overlapping area represents the amount of risk that can be diversified away by holding Young Poong Precision and Seoam Machinery Industry in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Seoam Machinery Industry and Young Poong 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 Young Poong Precision are associated (or correlated) with Seoam Machinery. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Seoam Machinery Industry has no effect on the direction of Young Poong i.e., Young Poong and Seoam Machinery go up and down completely randomly.

Pair Corralation between Young Poong and Seoam Machinery

Assuming the 90 days trading horizon Young Poong Precision is expected to generate 1.96 times more return on investment than Seoam Machinery. However, Young Poong is 1.96 times more volatile than Seoam Machinery Industry. It trades about 0.05 of its potential returns per unit of risk. Seoam Machinery Industry is currently generating about -0.02 per unit of risk. If you would invest  1,230,163  in Young Poong Precision on September 4, 2024 and sell it today you would earn a total of  385,837  from holding Young Poong Precision or generate 31.36% return on investment over 90 days.

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

Young Poong Precision  vs.  Seoam Machinery Industry

Young Poong Precision

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Young Poong Precision are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Young Poong sustained solid returns over the last few months and may actually be approaching a breakup point.

Seoam Machinery Industry

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Young Poong and Seoam Machinery

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

The idea behind Young Poong Precision and Seoam Machinery Industry 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.