Correlation Between Youngchang Chemical and Orbitech

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

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

Diversification Opportunities for Youngchang Chemical and Orbitech

0.18

Correlation Coefficient

Youngchang Chemical  Orbitech

Average diversification

The 3 months correlation between Youngchang and Orbitech is 0.18. Overlapping area represents the amount of risk that can be diversified away by holding Youngchang Chemical Co and Orbitech Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Orbitech and Youngchang Chemical 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 Youngchang Chemical Co are associated (or correlated) with Orbitech. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Orbitech has no effect on the direction of Youngchang Chemical i.e., Youngchang Chemical and Orbitech go up and down completely randomly.

Pair Corralation between Youngchang Chemical and Orbitech

Assuming the 90 days trading horizon Youngchang Chemical Co is expected to under-perform the Orbitech. In addition to that, Youngchang Chemical is 1.7 times more volatile than Orbitech Co. It trades about -0.02 of its total potential returns per unit of risk. Orbitech Co is currently generating about -0.02 per unit of volatility. If you would invest  235,000  in Orbitech Co on September 4, 2024 and sell it today you would lose (12,500) from holding Orbitech Co or give up 5.32% of portfolio value over 90 days.

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

Youngchang Chemical Co  vs.  Orbitech Co

Youngchang Chemical

Risk-Adjusted Performance

0 of 100

Very Weak

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

Orbitech

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Youngchang Chemical and Orbitech

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

The idea behind Youngchang Chemical Co and Orbitech Co 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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.