Correlation Between TK Chemical and Nable Communications

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

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

Diversification Opportunities for TK Chemical and Nable Communications

-0.38

Correlation Coefficient

TK Chemical  Nable Communications

Very good diversification

The 3 months correlation between 104480 and Nable is -0.38. Overlapping area represents the amount of risk that can be diversified away by holding TK Chemical and Nable Communications in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nable Communications and TK 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 TK Chemical are associated (or correlated) with Nable Communications. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nable Communications has no effect on the direction of TK Chemical i.e., TK Chemical and Nable Communications go up and down completely randomly.

Pair Corralation between TK Chemical and Nable Communications

Assuming the 90 days trading horizon TK Chemical is expected to generate 1.27 times less return on investment than Nable Communications. In addition to that, TK Chemical is 1.32 times more volatile than Nable Communications. It trades about 0.04 of its total potential returns per unit of risk. Nable Communications is currently generating about 0.07 per unit of volatility. If you would invest  649,000  in Nable Communications on September 20, 2024 and sell it today you would earn a total of  34,000  from holding Nable Communications or generate 5.24% return on investment over 90 days.

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

TK Chemical  vs.  Nable Communications

TK Chemical

Risk-Adjusted Performance

3 of 100

Weak

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.

Nable Communications

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Nable Communications are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Nable Communications is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with TK Chemical and Nable Communications

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

The idea behind TK Chemical and Nable Communications 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.