Correlation Between LAKE MATERIALS and ENERGYMACHINERY KOREA

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

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

Diversification Opportunities for LAKE MATERIALS and ENERGYMACHINERY KOREA

0.71

Correlation Coefficient

LAKE MATERIALS  ENERGYMACHINERY KOREA

Poor diversification

The 3 months correlation between LAKE and ENERGYMACHINERY is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding LAKE MATERIALS LTD and ENERGYMACHINERY KOREA CoLtd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ENERGYMACHINERY KOREA and LAKE MATERIALS 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 LAKE MATERIALS LTD are associated (or correlated) with ENERGYMACHINERY KOREA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ENERGYMACHINERY KOREA has no effect on the direction of LAKE MATERIALS i.e., LAKE MATERIALS and ENERGYMACHINERY KOREA go up and down completely randomly.

Pair Corralation between LAKE MATERIALS and ENERGYMACHINERY KOREA

Assuming the 90 days trading horizon LAKE MATERIALS LTD is expected to under-perform the ENERGYMACHINERY KOREA. In addition to that, LAKE MATERIALS is 1.02 times more volatile than ENERGYMACHINERY KOREA CoLtd. It trades about -0.16 of its total potential returns per unit of risk. ENERGYMACHINERY KOREA CoLtd is currently generating about 0.06 per unit of volatility. If you would invest  210,500  in ENERGYMACHINERY KOREA CoLtd on September 25, 2024 and sell it today you would earn a total of  19,000  from holding ENERGYMACHINERY KOREA CoLtd or generate 9.03% return on investment over 90 days.

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

LAKE MATERIALS LTD  vs.  ENERGYMACHINERY KOREA CoLtd

LAKE MATERIALS LTD

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days LAKE MATERIALS 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.

ENERGYMACHINERY KOREA

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in ENERGYMACHINERY KOREA CoLtd are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, ENERGYMACHINERY KOREA may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with LAKE MATERIALS and ENERGYMACHINERY KOREA

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

The idea behind LAKE MATERIALS LTD and ENERGYMACHINERY KOREA 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.