Correlation Between Young Poong and SP Systems

Can any of the company-specific risk be diversified away by investing in both Young Poong and SP Systems 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 SP Systems 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 SP Systems CoLtd, you can compare the effects of market volatilities on Young Poong and SP Systems 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 SP Systems. Check out your portfolio center. Please also check ongoing floating volatility patterns of Young Poong and SP Systems.

Diversification Opportunities for Young Poong and SP Systems

0.36

Correlation Coefficient

Young Poong  SP Systems

Weak diversification

The 3 months correlation between Young and 317830 is 0.36. Overlapping area represents the amount of risk that can be diversified away by holding Young Poong Precision and SP Systems CoLtd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SP Systems CoLtd 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 SP Systems. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SP Systems CoLtd has no effect on the direction of Young Poong i.e., Young Poong and SP Systems go up and down completely randomly.

Pair Corralation between Young Poong and SP Systems

Assuming the 90 days trading horizon Young Poong Precision is expected to generate 1.21 times more return on investment than SP Systems. However, Young Poong is 1.21 times more volatile than SP Systems CoLtd. It trades about 0.02 of its potential returns per unit of risk. SP Systems CoLtd is currently generating about -0.09 per unit of risk. If you would invest  1,308,684  in Young Poong Precision on September 12, 2024 and sell it today you would earn a total of  21,316  from holding Young Poong Precision or generate 1.63% return on investment over 90 days.

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

Young Poong Precision  vs.  SP Systems CoLtd

Young Poong Precision

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Young Poong Precision are ranked lower than 8 (%) 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.

SP Systems CoLtd

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days SP Systems CoLtd 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.

Pair Trading with Young Poong and SP Systems

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

The idea behind Young Poong Precision and SP Systems CoLtd 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.