Correlation Between Tokai Carbon and SIMMTECH

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

Diversification Opportunities for Tokai Carbon and SIMMTECH

0.99

Correlation Coefficient

Tokai Carbon  SIMMTECH

No risk reduction

The 3 months correlation between Tokai and SIMMTECH is 0.99. Overlapping area represents the amount of risk that can be diversified away by holding Tokai Carbon Korea and SIMMTECH Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SIMMTECH 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 SIMMTECH. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SIMMTECH has no effect on the direction of Tokai Carbon i.e., Tokai Carbon and SIMMTECH go up and down completely randomly.

Pair Corralation between Tokai Carbon and SIMMTECH

Assuming the 90 days trading horizon Tokai Carbon Korea is expected to generate 0.83 times more return on investment than SIMMTECH. However, Tokai Carbon Korea is 1.2 times less risky than SIMMTECH. It trades about -0.19 of its potential returns per unit of risk. SIMMTECH Co is currently generating about -0.28 per unit of risk. If you would invest  9,030,000  in Tokai Carbon Korea on September 6, 2024 and sell it today you would lose (2,150,000) from holding Tokai Carbon Korea or give up 23.81% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	98.31%
Values	Daily Returns

Tokai Carbon Korea  vs.  SIMMTECH 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.

SIMMTECH

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days SIMMTECH 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 SIMMTECH

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

The idea behind Tokai Carbon Korea and SIMMTECH 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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.