Correlation Between Tae Kyung and TK Chemical

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

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

Diversification Opportunities for Tae Kyung and TK Chemical

0.6

Correlation Coefficient

Tae Kyung  TK Chemical

Poor diversification

The 3 months correlation between Tae and 104480 is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding Tae Kyung Chemical and TK Chemical in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TK Chemical and Tae Kyung 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 Tae Kyung Chemical are associated (or correlated) with TK Chemical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of TK Chemical has no effect on the direction of Tae Kyung i.e., Tae Kyung and TK Chemical go up and down completely randomly.

Pair Corralation between Tae Kyung and TK Chemical

Assuming the 90 days trading horizon Tae Kyung Chemical is expected to generate 1.18 times more return on investment than TK Chemical. However, Tae Kyung is 1.18 times more volatile than TK Chemical. It trades about 0.05 of its potential returns per unit of risk. TK Chemical is currently generating about 0.04 per unit of risk. If you would invest  1,059,000  in Tae Kyung Chemical on September 21, 2024 and sell it today you would earn a total of  59,000  from holding Tae Kyung Chemical or generate 5.57% return on investment over 90 days.

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

Tae Kyung Chemical  vs.  TK Chemical

Tae Kyung Chemical

Risk-Adjusted Performance

4 of 100

Insignificant

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

TK Chemical

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in TK Chemical are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, TK Chemical is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Tae Kyung and TK Chemical

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

The idea behind Tae Kyung Chemical and TK Chemical 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 Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.