Correlation Between Tokai Carbon and SK Hynix

Can any of the company-specific risk be diversified away by investing in both Tokai Carbon and SK Hynix 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 Tokai Carbon and SK Hynix into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Tokai Carbon Korea and SK Hynix, you can compare the effects of market volatilities on Tokai Carbon and SK Hynix 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 Tokai Carbon with a short position of SK Hynix. Check out your portfolio center. Please also check ongoing floating volatility patterns of Tokai Carbon and SK Hynix.

Diversification Opportunities for Tokai Carbon and SK Hynix

0.08

Correlation Coefficient

Tokai Carbon  SK Hynix

Significant diversification

The 3 months correlation between Tokai and 000660 is 0.08. Overlapping area represents the amount of risk that can be diversified away by holding Tokai Carbon Korea and SK Hynix in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SK Hynix and Tokai Carbon 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 Tokai Carbon Korea are associated (or correlated) with SK Hynix. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SK Hynix has no effect on the direction of Tokai Carbon i.e., Tokai Carbon and SK Hynix go up and down completely randomly.

Pair Corralation between Tokai Carbon and SK Hynix

Assuming the 90 days trading horizon Tokai Carbon Korea is expected to under-perform the SK Hynix. But the stock apears to be less risky and, when comparing its historical volatility, Tokai Carbon Korea is 1.51 times less risky than SK Hynix. The stock trades about -0.19 of its potential returns per unit of risk. The SK Hynix is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  15,674,000  in SK Hynix on September 8, 2024 and sell it today you would earn a total of  1,036,000  from holding SK Hynix or generate 6.61% return on investment over 90 days.

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

Tokai Carbon Korea  vs.  SK Hynix

Tokai Carbon Korea

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Tokai Carbon Korea 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.

SK Hynix

Risk-Adjusted Performance

3 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in SK Hynix are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, SK Hynix may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Tokai Carbon and SK Hynix

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

The idea behind Tokai Carbon Korea and SK Hynix 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 Stocks Directory module to find actively traded stocks across global markets.