Correlation Between Daelim Trading and TK Chemical

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

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

Diversification Opportunities for Daelim Trading and TK Chemical

-0.06

Correlation Coefficient

Daelim Trading  TK Chemical

Good diversification

The 3 months correlation between Daelim and 104480 is -0.06. Overlapping area represents the amount of risk that can be diversified away by holding Daelim Trading Co and TK Chemical in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TK Chemical and Daelim Trading 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 Daelim Trading 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 Daelim Trading i.e., Daelim Trading and TK Chemical go up and down completely randomly.

Pair Corralation between Daelim Trading and TK Chemical

Assuming the 90 days trading horizon Daelim Trading Co is expected to generate 1.01 times more return on investment than TK Chemical. However, Daelim Trading is 1.01 times more volatile than TK Chemical. It trades about -0.02 of its potential returns per unit of risk. TK Chemical is currently generating about -0.1 per unit of risk. If you would invest  300,000  in Daelim Trading Co on August 31, 2024 and sell it today you would lose (24,500) from holding Daelim Trading Co or give up 8.17% of portfolio value over 90 days.

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

Daelim Trading Co  vs.  TK Chemical

Daelim Trading

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Daelim Trading Co has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Daelim Trading 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

0 of 100

Very Weak

Over the last 90 days TK Chemical has generated negative risk-adjusted returns adding no value to investors with long positions. 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 Daelim Trading and TK Chemical

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

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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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.