Correlation Between Tae Kyung and SH Energy

Can any of the company-specific risk be diversified away by investing in both Tae Kyung and SH Energy 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 Tae Kyung and SH Energy into the same portfolio, which is an essential part of the fundamental portfolio management process.

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

Diversification Opportunities for Tae Kyung and SH Energy

0.23

Correlation Coefficient

Tae Kyung  SH Energy

Modest diversification

The 3 months correlation between Tae and 002360 is 0.23. Overlapping area represents the amount of risk that can be diversified away by holding Tae Kyung Chemical and SH Energy Chemical in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SH Energy Chemical and Tae Kyung 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 Tae Kyung Chemical are associated (or correlated) with SH Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SH Energy Chemical has no effect on the direction of Tae Kyung i.e., Tae Kyung and SH Energy go up and down completely randomly.

Pair Corralation between Tae Kyung and SH Energy

Assuming the 90 days trading horizon Tae Kyung Chemical is expected to generate 0.8 times more return on investment than SH Energy. However, Tae Kyung Chemical is 1.25 times less risky than SH Energy. It trades about 0.0 of its potential returns per unit of risk. SH Energy Chemical is currently generating about -0.03 per unit of risk. If you would invest  1,189,525  in Tae Kyung Chemical on October 26, 2024 and sell it today you would lose (64,525) from holding Tae Kyung Chemical or give up 5.42% of portfolio value over 90 days.

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

Tae Kyung Chemical  vs.  SH Energy Chemical

Tae Kyung Chemical

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Tae Kyung Chemical are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Tae Kyung is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

SH Energy Chemical

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in SH Energy Chemical are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, SH Energy is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Tae Kyung and SH Energy

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

The idea behind Tae Kyung Chemical and SH Energy 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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.