Correlation Between Miwon Chemical and TK Chemical

Can any of the company-specific risk be diversified away by investing in both Miwon 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 Miwon 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 Miwon Chemical and TK Chemical, you can compare the effects of market volatilities on Miwon 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 Miwon Chemical with a short position of TK Chemical. Check out your portfolio center. Please also check ongoing floating volatility patterns of Miwon Chemical and TK Chemical.

Diversification Opportunities for Miwon Chemical and TK Chemical

0.54

Correlation Coefficient

Miwon Chemical  TK Chemical

Very weak diversification

The 3 months correlation between Miwon and 104480 is 0.54. Overlapping area represents the amount of risk that can be diversified away by holding Miwon Chemical and TK Chemical in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TK Chemical and Miwon 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 Miwon 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 Miwon Chemical i.e., Miwon Chemical and TK Chemical go up and down completely randomly.

Pair Corralation between Miwon Chemical and TK Chemical

Assuming the 90 days trading horizon Miwon Chemical is expected to under-perform the TK Chemical. But the stock apears to be less risky and, when comparing its historical volatility, Miwon Chemical is 1.79 times less risky than TK Chemical. The stock trades about -0.02 of its potential returns per unit of risk. The TK Chemical is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  135,300  in TK Chemical on September 20, 2024 and sell it today you would earn a total of  4,900  from holding TK Chemical or generate 3.62% return on investment over 90 days.

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

Miwon Chemical  vs.  TK Chemical

Miwon Chemical

Risk-Adjusted Performance

0 of 100

Weak

Over the last 90 days Miwon Chemical has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Miwon Chemical is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

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.

Pair Trading with Miwon Chemical and TK Chemical

The main advantage of trading using opposite Miwon Chemical and TK Chemical positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Miwon 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 Miwon 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.