Correlation Between ENERGYMACHINERY KOREA and Keyang Electric

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

By analyzing existing cross correlation between ENERGYMACHINERY KOREA CoLtd and Keyang Electric Machinery, you can compare the effects of market volatilities on ENERGYMACHINERY KOREA and Keyang Electric 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 ENERGYMACHINERY KOREA with a short position of Keyang Electric. Check out your portfolio center. Please also check ongoing floating volatility patterns of ENERGYMACHINERY KOREA and Keyang Electric.

Diversification Opportunities for ENERGYMACHINERY KOREA and Keyang Electric

0.66

Correlation Coefficient

ENERGYMACHINERY KOREA  Keyang Electric

Poor diversification

The 3 months correlation between ENERGYMACHINERY and Keyang is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding ENERGYMACHINERY KOREA CoLtd and Keyang Electric Machinery in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Keyang Electric Machinery and ENERGYMACHINERY KOREA 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 ENERGYMACHINERY KOREA CoLtd are associated (or correlated) with Keyang Electric. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Keyang Electric Machinery has no effect on the direction of ENERGYMACHINERY KOREA i.e., ENERGYMACHINERY KOREA and Keyang Electric go up and down completely randomly.

Pair Corralation between ENERGYMACHINERY KOREA and Keyang Electric

Assuming the 90 days trading horizon ENERGYMACHINERY KOREA CoLtd is expected to generate 1.27 times more return on investment than Keyang Electric. However, ENERGYMACHINERY KOREA is 1.27 times more volatile than Keyang Electric Machinery. It trades about 0.03 of its potential returns per unit of risk. Keyang Electric Machinery is currently generating about -0.02 per unit of risk. If you would invest  205,000  in ENERGYMACHINERY KOREA CoLtd on September 21, 2024 and sell it today you would earn a total of  4,500  from holding ENERGYMACHINERY KOREA CoLtd or generate 2.2% return on investment over 90 days.

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

ENERGYMACHINERY KOREA CoLtd  vs.  Keyang Electric Machinery

ENERGYMACHINERY KOREA

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in ENERGYMACHINERY KOREA CoLtd are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, ENERGYMACHINERY KOREA is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Keyang Electric Machinery

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with ENERGYMACHINERY KOREA and Keyang Electric

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

The idea behind ENERGYMACHINERY KOREA CoLtd and Keyang Electric Machinery 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.