Correlation Between CJ Cheiljedang and TPC Mechatronics

Can any of the company-specific risk be diversified away by investing in both CJ Cheiljedang and TPC Mechatronics 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 CJ Cheiljedang and TPC Mechatronics into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between CJ Cheiljedang and TPC Mechatronics, you can compare the effects of market volatilities on CJ Cheiljedang and TPC Mechatronics 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 CJ Cheiljedang with a short position of TPC Mechatronics. Check out your portfolio center. Please also check ongoing floating volatility patterns of CJ Cheiljedang and TPC Mechatronics.

Diversification Opportunities for CJ Cheiljedang and TPC Mechatronics

0.86

Correlation Coefficient

CJ Cheiljedang  TPC Mechatronics

Very poor diversification

The 3 months correlation between 097950 and TPC is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding CJ Cheiljedang and TPC Mechatronics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TPC Mechatronics and CJ Cheiljedang 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 CJ Cheiljedang are associated (or correlated) with TPC Mechatronics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of TPC Mechatronics has no effect on the direction of CJ Cheiljedang i.e., CJ Cheiljedang and TPC Mechatronics go up and down completely randomly.

Pair Corralation between CJ Cheiljedang and TPC Mechatronics

Assuming the 90 days trading horizon CJ Cheiljedang is expected to generate 0.87 times more return on investment than TPC Mechatronics. However, CJ Cheiljedang is 1.14 times less risky than TPC Mechatronics. It trades about -0.12 of its potential returns per unit of risk. TPC Mechatronics is currently generating about -0.23 per unit of risk. If you would invest  32,097,000  in CJ Cheiljedang on August 30, 2024 and sell it today you would lose (4,747,000) from holding CJ Cheiljedang or give up 14.79% of portfolio value over 90 days.

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

CJ Cheiljedang  vs.  TPC Mechatronics

CJ Cheiljedang

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days CJ Cheiljedang 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 December 2024. The current disturbance may also be a sign of long term up-swing for the company investors.

TPC Mechatronics

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days TPC Mechatronics 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 December 2024. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with CJ Cheiljedang and TPC Mechatronics

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

The idea behind CJ Cheiljedang and TPC Mechatronics 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.