Correlation Between Korea Zinc and TPC Mechatronics

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

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

Diversification Opportunities for Korea Zinc and TPC Mechatronics

-0.84

Correlation Coefficient

Korea Zinc  TPC Mechatronics

Pay attention - limited upside

The 3 months correlation between Korea and TPC is -0.84. Overlapping area represents the amount of risk that can be diversified away by holding Korea Zinc and TPC Mechatronics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TPC Mechatronics and Korea Zinc 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 Korea Zinc are associated (or correlated) with TPC Mechatronics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of TPC Mechatronics has no effect on the direction of Korea Zinc i.e., Korea Zinc and TPC Mechatronics go up and down completely randomly.

Pair Corralation between Korea Zinc and TPC Mechatronics

Assuming the 90 days trading horizon Korea Zinc is expected to generate 1.63 times more return on investment than TPC Mechatronics. However, Korea Zinc is 1.63 times more volatile than TPC Mechatronics. It trades about 0.28 of its potential returns per unit of risk. TPC Mechatronics is currently generating about -0.19 per unit of risk. If you would invest  54,200,000  in Korea Zinc on September 1, 2024 and sell it today you would earn a total of  45,800,000  from holding Korea Zinc or generate 84.5% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Significant
Accuracy	98.33%
Values	Daily Returns

Korea Zinc  vs.  TPC Mechatronics

Korea Zinc

Risk-Adjusted Performance

22 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Korea Zinc are ranked lower than 22 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Korea Zinc sustained solid returns over the last few months and may actually be approaching a breakup point.

TPC Mechatronics

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days TPC Mechatronics 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 December 2024. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Korea Zinc and TPC Mechatronics

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

The idea behind Korea Zinc and TPC Mechatronics 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.