Correlation Between ENERGYMACHINERY KOREA and TK Chemical

Can any of the company-specific risk be diversified away by investing in both ENERGYMACHINERY KOREA and TK Chemical 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 ENERGYMACHINERY KOREA and TK Chemical into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between ENERGYMACHINERY KOREA CoLtd and TK Chemical, you can compare the effects of market volatilities on ENERGYMACHINERY KOREA and TK Chemical 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 ENERGYMACHINERY KOREA with a short position of TK Chemical. Check out your portfolio center. Please also check ongoing floating volatility patterns of ENERGYMACHINERY KOREA and TK Chemical.

Diversification Opportunities for ENERGYMACHINERY KOREA and TK Chemical

0.49

Correlation Coefficient

ENERGYMACHINERY KOREA  TK Chemical

Very weak diversification

The 3 months correlation between ENERGYMACHINERY and 104480 is 0.49. Overlapping area represents the amount of risk that can be diversified away by holding ENERGYMACHINERY KOREA CoLtd and TK Chemical in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TK Chemical and ENERGYMACHINERY KOREA 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 ENERGYMACHINERY KOREA CoLtd are associated (or correlated) with TK Chemical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of TK Chemical has no effect on the direction of ENERGYMACHINERY KOREA i.e., ENERGYMACHINERY KOREA and TK Chemical go up and down completely randomly.

Pair Corralation between ENERGYMACHINERY KOREA and TK Chemical

Assuming the 90 days trading horizon ENERGYMACHINERY KOREA CoLtd is expected to generate 1.11 times more return on investment than TK Chemical. However, ENERGYMACHINERY KOREA is 1.11 times more volatile than TK Chemical. It trades about -0.05 of its potential returns per unit of risk. TK Chemical is currently generating about -0.17 per unit of risk. If you would invest  219,500  in ENERGYMACHINERY KOREA CoLtd on December 28, 2024 and sell it today you would lose (12,500) from holding ENERGYMACHINERY KOREA CoLtd or give up 5.69% of portfolio value over 90 days.

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

ENERGYMACHINERY KOREA CoLtd  vs.  TK Chemical

ENERGYMACHINERY KOREA

Risk-Adjusted Performance

Very Weak

Over the last 90 days ENERGYMACHINERY KOREA CoLtd has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, ENERGYMACHINERY KOREA is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

TK Chemical

Risk-Adjusted Performance

Very Weak

Over the last 90 days TK Chemical 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 April 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with ENERGYMACHINERY KOREA and TK Chemical

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

The idea behind ENERGYMACHINERY KOREA CoLtd and TK Chemical 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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.