Correlation Between Tokai Carbon and DeviceENGCOLtd

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

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

Diversification Opportunities for Tokai Carbon and DeviceENGCOLtd

0.53

Correlation Coefficient

Tokai Carbon  DeviceENGCOLtd

Very weak diversification

The 3 months correlation between Tokai and DeviceENGCOLtd is 0.53. Overlapping area represents the amount of risk that can be diversified away by holding Tokai Carbon Korea and DeviceENGCOLtd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on DeviceENGCOLtd and Tokai Carbon 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 Tokai Carbon Korea are associated (or correlated) with DeviceENGCOLtd. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of DeviceENGCOLtd has no effect on the direction of Tokai Carbon i.e., Tokai Carbon and DeviceENGCOLtd go up and down completely randomly.

Pair Corralation between Tokai Carbon and DeviceENGCOLtd

Assuming the 90 days trading horizon Tokai Carbon Korea is expected to under-perform the DeviceENGCOLtd. In addition to that, Tokai Carbon is 1.32 times more volatile than DeviceENGCOLtd. It trades about -0.22 of its total potential returns per unit of risk. DeviceENGCOLtd is currently generating about -0.11 per unit of volatility. If you would invest  1,419,000  in DeviceENGCOLtd on September 3, 2024 and sell it today you would lose (166,000) from holding DeviceENGCOLtd or give up 11.7% of portfolio value over 90 days.

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

Tokai Carbon Korea  vs.  DeviceENGCOLtd

Tokai Carbon Korea

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Tokai Carbon Korea 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.

DeviceENGCOLtd

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days DeviceENGCOLtd 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.

Pair Trading with Tokai Carbon and DeviceENGCOLtd

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

The idea behind Tokai Carbon Korea and DeviceENGCOLtd 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.