Correlation Between Tokai Carbon and TES

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

Diversification Opportunities for Tokai Carbon and TES

0.96

Correlation Coefficient

Tokai Carbon  TES

Almost no diversification

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

Pair Corralation between Tokai Carbon and TES

Assuming the 90 days trading horizon Tokai Carbon is expected to generate 1.99 times less return on investment than TES. But when comparing it to its historical volatility, Tokai Carbon Korea is 1.36 times less risky than TES. It trades about 0.11 of its potential returns per unit of risk. TES Co is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest  1,550,000  in TES Co on December 30, 2024 and sell it today you would earn a total of  620,000  from holding TES Co or generate 40.0% 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.  TES Co

Tokai Carbon Korea

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Tokai Carbon Korea are ranked lower than 8 (%) 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.

TES Co

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in TES Co are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, TES sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Tokai Carbon and TES

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

The idea behind Tokai Carbon Korea and TES 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.

Check out your portfolio center.

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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.