Correlation Between Wave Electronics and Tae Kyung

Can any of the company-specific risk be diversified away by investing in both Wave Electronics and Tae Kyung 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 Wave Electronics and Tae Kyung into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Wave Electronics Co and Tae Kyung Chemical, you can compare the effects of market volatilities on Wave Electronics and Tae Kyung 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 Wave Electronics with a short position of Tae Kyung. Check out your portfolio center. Please also check ongoing floating volatility patterns of Wave Electronics and Tae Kyung.

Diversification Opportunities for Wave Electronics and Tae Kyung

0.32

Correlation Coefficient

Wave Electronics  Tae Kyung

Weak diversification

The 3 months correlation between Wave and Tae is 0.32. Overlapping area represents the amount of risk that can be diversified away by holding Wave Electronics Co and Tae Kyung Chemical in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tae Kyung Chemical and Wave Electronics 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 Wave Electronics Co are associated (or correlated) with Tae Kyung. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tae Kyung Chemical has no effect on the direction of Wave Electronics i.e., Wave Electronics and Tae Kyung go up and down completely randomly.

Pair Corralation between Wave Electronics and Tae Kyung

Assuming the 90 days trading horizon Wave Electronics Co is expected to under-perform the Tae Kyung. In addition to that, Wave Electronics is 1.49 times more volatile than Tae Kyung Chemical. It trades about -0.02 of its total potential returns per unit of risk. Tae Kyung Chemical is currently generating about -0.02 per unit of volatility. If you would invest  1,301,611  in Tae Kyung Chemical on October 9, 2024 and sell it today you would lose (179,611) from holding Tae Kyung Chemical or give up 13.8% of portfolio value over 90 days.

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

Wave Electronics Co  vs.  Tae Kyung Chemical

Wave Electronics

Risk-Adjusted Performance

0 of 100

Very Weak

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

Tae Kyung Chemical

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Wave Electronics and Tae Kyung

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

The idea behind Wave Electronics Co and Tae Kyung 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.