Correlation Between DC Media and TK Chemical

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

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

Diversification Opportunities for DC Media and TK Chemical

0.12

Correlation Coefficient

DC Media  TK Chemical

Average diversification

The 3 months correlation between 263720 and 104480 is 0.12. Overlapping area represents the amount of risk that can be diversified away by holding DC Media Co and TK Chemical in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TK Chemical and DC Media 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 DC Media Co 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 DC Media i.e., DC Media and TK Chemical go up and down completely randomly.

Pair Corralation between DC Media and TK Chemical

Assuming the 90 days trading horizon DC Media Co is expected to under-perform the TK Chemical. In addition to that, DC Media is 1.03 times more volatile than TK Chemical. It trades about -0.02 of its total potential returns per unit of risk. TK Chemical is currently generating about 0.03 per unit of volatility. If you would invest  170,900  in TK Chemical on September 22, 2024 and sell it today you would earn a total of  10,700  from holding TK Chemical or generate 6.26% return on investment over 90 days.

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

DC Media Co  vs.  TK Chemical

DC Media

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in DC Media Co are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, DC Media sustained solid returns over the last few months and may actually be approaching a breakup point.

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 DC Media and TK Chemical

The main advantage of trading using opposite DC Media and TK Chemical positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if DC Media 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 DC Media Co 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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.