Correlation Between People Technology and TK Chemical

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

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

Diversification Opportunities for People Technology and TK Chemical

0.47

Correlation Coefficient

People Technology  TK Chemical

Very weak diversification

The 3 months correlation between People and 104480 is 0.47. Overlapping area represents the amount of risk that can be diversified away by holding People Technology and TK Chemical in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TK Chemical and People Technology 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 People Technology 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 People Technology i.e., People Technology and TK Chemical go up and down completely randomly.

Pair Corralation between People Technology and TK Chemical

Assuming the 90 days trading horizon People Technology is expected to under-perform the TK Chemical. But the stock apears to be less risky and, when comparing its historical volatility, People Technology is 2.32 times less risky than TK Chemical. The stock trades about -0.25 of its potential returns per unit of risk. The TK Chemical is currently generating about 0.26 of returns per unit of risk over similar time horizon. If you would invest  129,200  in TK Chemical on September 23, 2024 and sell it today you would earn a total of  52,400  from holding TK Chemical or generate 40.56% return on investment over 90 days.

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

People Technology  vs.  TK Chemical

People Technology

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days People Technology 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.

TK Chemical

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in TK Chemical are ranked lower than 10 (%) 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 People Technology and TK Chemical

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

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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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.