Correlation Between ITM Semiconductor and Tokai Carbon

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

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

Diversification Opportunities for ITM Semiconductor and Tokai Carbon

0.85

Correlation Coefficient

ITM Semiconductor  Tokai Carbon

Very poor diversification

The 3 months correlation between ITM and Tokai is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding ITM Semiconductor Co and Tokai Carbon Korea in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tokai Carbon Korea and ITM Semiconductor 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 ITM Semiconductor Co are associated (or correlated) with Tokai Carbon. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tokai Carbon Korea has no effect on the direction of ITM Semiconductor i.e., ITM Semiconductor and Tokai Carbon go up and down completely randomly.

Pair Corralation between ITM Semiconductor and Tokai Carbon

Assuming the 90 days trading horizon ITM Semiconductor Co is expected to under-perform the Tokai Carbon. But the stock apears to be less risky and, when comparing its historical volatility, ITM Semiconductor Co is 1.03 times less risky than Tokai Carbon. The stock trades about -0.32 of its potential returns per unit of risk. The Tokai Carbon Korea is currently generating about -0.19 of returns per unit of risk over similar time horizon. If you would invest  9,070,000  in Tokai Carbon Korea on September 8, 2024 and sell it today you would lose (2,150,000) from holding Tokai Carbon Korea or give up 23.7% of portfolio value over 90 days.

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

ITM Semiconductor Co  vs.  Tokai Carbon Korea

ITM Semiconductor

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days ITM Semiconductor 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.

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.

Pair Trading with ITM Semiconductor and Tokai Carbon

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

The idea behind ITM Semiconductor Co and Tokai Carbon Korea 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.