Correlation Between TK Chemical and Kyung Chang

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

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

Diversification Opportunities for TK Chemical and Kyung Chang

0.88

Correlation Coefficient

TK Chemical  Kyung Chang

Very poor diversification

The 3 months correlation between 104480 and Kyung is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding TK Chemical and Kyung Chang Industrial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kyung Chang Industrial and TK Chemical 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 TK Chemical are associated (or correlated) with Kyung Chang. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kyung Chang Industrial has no effect on the direction of TK Chemical i.e., TK Chemical and Kyung Chang go up and down completely randomly.

Pair Corralation between TK Chemical and Kyung Chang

Assuming the 90 days trading horizon TK Chemical is expected to generate 0.84 times more return on investment than Kyung Chang. However, TK Chemical is 1.19 times less risky than Kyung Chang. It trades about -0.04 of its potential returns per unit of risk. Kyung Chang Industrial is currently generating about -0.09 per unit of risk. If you would invest  141,000  in TK Chemical on September 3, 2024 and sell it today you would lose (5,600) from holding TK Chemical or give up 3.97% of portfolio value over 90 days.

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

TK Chemical  vs.  Kyung Chang Industrial

TK Chemical

Risk-Adjusted Performance

0 of 100

Very Weak

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

Kyung Chang Industrial

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Kyung Chang Industrial has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with TK Chemical and Kyung Chang

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

The idea behind TK Chemical and Kyung Chang Industrial 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 Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.