Correlation Between Tae Kyung and LAKE MATERIALS

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

Diversification Opportunities for Tae Kyung and LAKE MATERIALS

0.83

Correlation Coefficient

Tae Kyung  LAKE MATERIALS

Very poor diversification

The 3 months correlation between Tae and LAKE is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding Tae Kyung Chemical and LAKE MATERIALS LTD in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LAKE MATERIALS LTD 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 LAKE MATERIALS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of LAKE MATERIALS LTD has no effect on the direction of Tae Kyung i.e., Tae Kyung and LAKE MATERIALS go up and down completely randomly.

Pair Corralation between Tae Kyung and LAKE MATERIALS

Assuming the 90 days trading horizon Tae Kyung is expected to generate 6.24 times less return on investment than LAKE MATERIALS. But when comparing it to its historical volatility, Tae Kyung Chemical is 3.93 times less risky than LAKE MATERIALS. It trades about 0.08 of its potential returns per unit of risk. LAKE MATERIALS LTD is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  1,187,000  in LAKE MATERIALS LTD on December 22, 2024 and sell it today you would earn a total of  379,000  from holding LAKE MATERIALS LTD or generate 31.93% return on investment over 90 days.

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

Tae Kyung Chemical  vs.  LAKE MATERIALS LTD

Tae Kyung Chemical

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Tae Kyung Chemical are ranked lower than 6 (%) 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.

LAKE MATERIALS LTD

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in LAKE MATERIALS LTD are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, LAKE MATERIALS sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Tae Kyung and LAKE MATERIALS

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

The idea behind Tae Kyung Chemical and LAKE MATERIALS LTD 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.