Correlation Between Tokai Carbon and Dongwoon Anatech

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

Diversification Opportunities for Tokai Carbon and Dongwoon Anatech

0.87

Correlation Coefficient

Tokai Carbon  Dongwoon Anatech

Very poor diversification

The 3 months correlation between Tokai and Dongwoon is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding Tokai Carbon Korea and Dongwoon Anatech Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dongwoon Anatech 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 Dongwoon Anatech. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dongwoon Anatech has no effect on the direction of Tokai Carbon i.e., Tokai Carbon and Dongwoon Anatech go up and down completely randomly.

Pair Corralation between Tokai Carbon and Dongwoon Anatech

Assuming the 90 days trading horizon Tokai Carbon Korea is expected to generate 1.0 times more return on investment than Dongwoon Anatech. However, Tokai Carbon Korea is 1.0 times less risky than Dongwoon Anatech. It trades about 0.14 of its potential returns per unit of risk. Dongwoon Anatech Co is currently generating about 0.06 per unit of risk. If you would invest  6,880,000  in Tokai Carbon Korea on December 25, 2024 and sell it today you would earn a total of  1,690,000  from holding Tokai Carbon Korea or generate 24.56% return on investment over 90 days.

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

Tokai Carbon Korea  vs.  Dongwoon Anatech Co

Tokai Carbon Korea

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Tokai Carbon Korea are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Tokai Carbon sustained solid returns over the last few months and may actually be approaching a breakup point.

Dongwoon Anatech

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Dongwoon Anatech Co are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Dongwoon Anatech may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Tokai Carbon and Dongwoon Anatech

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

The idea behind Tokai Carbon Korea and Dongwoon Anatech 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.