Correlation Between Daol Investment and TK Chemical

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

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

Diversification Opportunities for Daol Investment and TK Chemical

0.7

Correlation Coefficient

Daol Investment  TK Chemical

Poor diversification

The 3 months correlation between Daol and 104480 is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding Daol Investment Securities and TK Chemical in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TK Chemical and Daol Investment 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 Daol Investment Securities 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 Daol Investment i.e., Daol Investment and TK Chemical go up and down completely randomly.

Pair Corralation between Daol Investment and TK Chemical

Assuming the 90 days trading horizon Daol Investment Securities is expected to under-perform the TK Chemical. But the stock apears to be less risky and, when comparing its historical volatility, Daol Investment Securities is 1.11 times less risky than TK Chemical. The stock trades about -0.09 of its potential returns per unit of risk. The TK Chemical is currently generating about -0.05 of returns per unit of risk over similar time horizon. If you would invest  181,400  in TK Chemical on September 14, 2024 and sell it today you would lose (45,600) from holding TK Chemical or give up 25.14% of portfolio value over 90 days.

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

Daol Investment Securities  vs.  TK Chemical

Daol Investment Secu

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Daol Investment Securities has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company 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 Daol Investment and TK Chemical

The main advantage of trading using opposite Daol Investment and TK Chemical positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Daol Investment 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 Daol Investment Securities 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.