Correlation Between Tae Kyung and PJ Electronics

Can any of the company-specific risk be diversified away by investing in both Tae Kyung and PJ Electronics 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 PJ Electronics 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 PJ Electronics Co, you can compare the effects of market volatilities on Tae Kyung and PJ Electronics 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 PJ Electronics. Check out your portfolio center. Please also check ongoing floating volatility patterns of Tae Kyung and PJ Electronics.

Diversification Opportunities for Tae Kyung and PJ Electronics

0.35

Correlation Coefficient

Tae Kyung  PJ Electronics

Weak diversification

The 3 months correlation between Tae and 006140 is 0.35. Overlapping area represents the amount of risk that can be diversified away by holding Tae Kyung Chemical and PJ Electronics Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PJ Electronics 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 PJ Electronics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PJ Electronics has no effect on the direction of Tae Kyung i.e., Tae Kyung and PJ Electronics go up and down completely randomly.

Pair Corralation between Tae Kyung and PJ Electronics

Assuming the 90 days trading horizon Tae Kyung Chemical is expected to generate 0.95 times more return on investment than PJ Electronics. However, Tae Kyung Chemical is 1.05 times less risky than PJ Electronics. It trades about -0.02 of its potential returns per unit of risk. PJ Electronics Co is currently generating about -0.04 per unit of risk. If you would invest  1,301,611  in Tae Kyung Chemical on October 9, 2024 and sell it today you would lose (179,611) from holding Tae Kyung Chemical or give up 13.8% 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.  PJ Electronics Co

Tae Kyung Chemical

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Tae Kyung Chemical has generated negative risk-adjusted returns adding no value to investors with long positions. 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.

PJ Electronics

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days PJ Electronics Co has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Tae Kyung and PJ Electronics

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

The idea behind Tae Kyung Chemical and PJ Electronics Co 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.