Correlation Between ENERGYMACHINERY KOREA and TOPMATERIAL

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

Diversification Opportunities for ENERGYMACHINERY KOREA and TOPMATERIAL

0.78

Correlation Coefficient

ENERGYMACHINERY KOREA  TOPMATERIAL

Poor diversification

The 3 months correlation between ENERGYMACHINERY and TOPMATERIAL is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding ENERGYMACHINERY KOREA CoLtd and TOPMATERIAL LTD in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TOPMATERIAL LTD 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 TOPMATERIAL. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of TOPMATERIAL LTD has no effect on the direction of ENERGYMACHINERY KOREA i.e., ENERGYMACHINERY KOREA and TOPMATERIAL go up and down completely randomly.

Pair Corralation between ENERGYMACHINERY KOREA and TOPMATERIAL

Assuming the 90 days trading horizon ENERGYMACHINERY KOREA CoLtd is expected to generate 0.93 times more return on investment than TOPMATERIAL. However, ENERGYMACHINERY KOREA CoLtd is 1.08 times less risky than TOPMATERIAL. It trades about 0.03 of its potential returns per unit of risk. TOPMATERIAL LTD is currently generating about -0.14 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.  TOPMATERIAL LTD

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.

TOPMATERIAL LTD

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days TOPMATERIAL LTD 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 ENERGYMACHINERY KOREA and TOPMATERIAL

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

The idea behind ENERGYMACHINERY KOREA CoLtd and TOPMATERIAL LTD 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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.