Correlation Between LEENO Industrial and TK Chemical

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

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

Diversification Opportunities for LEENO Industrial and TK Chemical

-0.01

Correlation Coefficient

LEENO Industrial  TK Chemical

Good diversification

The 3 months correlation between LEENO and 104480 is -0.01. Overlapping area represents the amount of risk that can be diversified away by holding LEENO Industrial and TK Chemical in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TK Chemical and LEENO Industrial 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 LEENO Industrial 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 LEENO Industrial i.e., LEENO Industrial and TK Chemical go up and down completely randomly.

Pair Corralation between LEENO Industrial and TK Chemical

Assuming the 90 days trading horizon LEENO Industrial is expected to generate 1.95 times more return on investment than TK Chemical. However, LEENO Industrial is 1.95 times more volatile than TK Chemical. It trades about 0.06 of its potential returns per unit of risk. TK Chemical is currently generating about -0.22 per unit of risk. If you would invest  19,190,000  in LEENO Industrial on December 25, 2024 and sell it today you would earn a total of  1,410,000  from holding LEENO Industrial or generate 7.35% return on investment over 90 days.

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

LEENO Industrial  vs.  TK Chemical

LEENO Industrial

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in LEENO Industrial are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, LEENO Industrial may actually be approaching a critical reversion point that can send shares even higher in April 2025.

TK Chemical

Risk-Adjusted Performance

Very Weak

Over the last 90 days TK Chemical 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 April 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with LEENO Industrial and TK Chemical

The main advantage of trading using opposite LEENO Industrial and TK Chemical positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if LEENO Industrial 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 LEENO Industrial 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.