Correlation Between TK Chemical and Lotte Data

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

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

Diversification Opportunities for TK Chemical and Lotte Data

0.7

Correlation Coefficient

TK Chemical  Lotte Data

Poor diversification

The 3 months correlation between 104480 and Lotte is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding TK Chemical and Lotte Data Communication in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lotte Data Communication 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 Lotte Data. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lotte Data Communication has no effect on the direction of TK Chemical i.e., TK Chemical and Lotte Data go up and down completely randomly.

Pair Corralation between TK Chemical and Lotte Data

Assuming the 90 days trading horizon TK Chemical is expected to generate 0.66 times more return on investment than Lotte Data. However, TK Chemical is 1.52 times less risky than Lotte Data. It trades about -0.08 of its potential returns per unit of risk. Lotte Data Communication is currently generating about -0.06 per unit of risk. If you would invest  173,700  in TK Chemical on September 19, 2024 and sell it today you would lose (35,100) from holding TK Chemical or give up 20.21% of portfolio value over 90 days.

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

TK Chemical  vs.  Lotte Data Communication

TK Chemical

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in TK Chemical are ranked lower than 2 (%) 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.

Lotte Data Communication

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Lotte Data Communication 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.

Pair Trading with TK Chemical and Lotte Data

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

The idea behind TK Chemical and Lotte Data Communication 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.