Correlation Between Tokai Carbon and Soulbrain Holdings

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

Diversification Opportunities for Tokai Carbon and Soulbrain Holdings

0.96

Correlation Coefficient

Tokai Carbon  Soulbrain Holdings

Almost no diversification

The 3 months correlation between Tokai and Soulbrain is 0.96. Overlapping area represents the amount of risk that can be diversified away by holding Tokai Carbon Korea and Soulbrain Holdings Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Soulbrain Holdings 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 Soulbrain Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Soulbrain Holdings has no effect on the direction of Tokai Carbon i.e., Tokai Carbon and Soulbrain Holdings go up and down completely randomly.

Pair Corralation between Tokai Carbon and Soulbrain Holdings

Assuming the 90 days trading horizon Tokai Carbon is expected to generate 2.8 times less return on investment than Soulbrain Holdings. But when comparing it to its historical volatility, Tokai Carbon Korea is 2.3 times less risky than Soulbrain Holdings. It trades about 0.1 of its potential returns per unit of risk. Soulbrain Holdings Co is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  3,685,000  in Soulbrain Holdings Co on September 20, 2024 and sell it today you would earn a total of  325,000  from holding Soulbrain Holdings Co or generate 8.82% return on investment over 90 days.

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

Tokai Carbon Korea  vs.  Soulbrain Holdings Co

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.

Soulbrain Holdings

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Soulbrain Holdings Co 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.

Pair Trading with Tokai Carbon and Soulbrain Holdings

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

The idea behind Tokai Carbon Korea and Soulbrain Holdings 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.

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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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.