Correlation Between Namhae Chemical and TK Chemical

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

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

Diversification Opportunities for Namhae Chemical and TK Chemical

0.17

Correlation Coefficient

Namhae Chemical  TK Chemical

Average diversification

The 3 months correlation between Namhae and 104480 is 0.17. Overlapping area represents the amount of risk that can be diversified away by holding Namhae Chemical and TK Chemical in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TK Chemical and Namhae 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 Namhae 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 Namhae Chemical i.e., Namhae Chemical and TK Chemical go up and down completely randomly.

Pair Corralation between Namhae Chemical and TK Chemical

Assuming the 90 days trading horizon Namhae Chemical is expected to under-perform the TK Chemical. But the stock apears to be less risky and, when comparing its historical volatility, Namhae Chemical is 3.41 times less risky than TK Chemical. The stock trades about -0.09 of its potential returns per unit of risk. The TK Chemical is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  144,500  in TK Chemical on September 30, 2024 and sell it today you would earn a total of  35,400  from holding TK Chemical or generate 24.5% return on investment over 90 days.

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

Namhae Chemical  vs.  TK Chemical

Namhae Chemical

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Namhae Chemical has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

TK Chemical

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in TK Chemical are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, TK Chemical sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Namhae Chemical and TK Chemical

The main advantage of trading using opposite Namhae Chemical and TK Chemical positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Namhae Chemical 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 Namhae 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.

Check out your portfolio center.

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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.