Correlation Between TK Chemical and Fantagio Corp

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

By analyzing existing cross correlation between TK Chemical and Fantagio Corp, you can compare the effects of market volatilities on TK Chemical and Fantagio Corp 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 Fantagio Corp. Check out your portfolio center. Please also check ongoing floating volatility patterns of TK Chemical and Fantagio Corp.

Diversification Opportunities for TK Chemical and Fantagio Corp

0.12

Correlation Coefficient

TK Chemical  Fantagio Corp

Average diversification

The 3 months correlation between 104480 and Fantagio is 0.12. Overlapping area represents the amount of risk that can be diversified away by holding TK Chemical and Fantagio Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fantagio Corp 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 Fantagio Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fantagio Corp has no effect on the direction of TK Chemical i.e., TK Chemical and Fantagio Corp go up and down completely randomly.

Pair Corralation between TK Chemical and Fantagio Corp

Assuming the 90 days trading horizon TK Chemical is expected to generate 1.76 times more return on investment than Fantagio Corp. However, TK Chemical is 1.76 times more volatile than Fantagio Corp. It trades about 0.1 of its potential returns per unit of risk. Fantagio Corp is currently generating about -0.29 per unit of risk. If you would invest  144,500  in TK Chemical on September 30, 2024 and sell it today you would earn a total of  35,400  from holding TK Chemical or generate 24.5% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	77.42%
Values	Daily Returns

TK Chemical  vs.  Fantagio Corp

TK Chemical

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in TK Chemical are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, TK Chemical sustained solid returns over the last few months and may actually be approaching a breakup point.

Fantagio Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Fantagio Corp 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 TK Chemical and Fantagio Corp

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

The idea behind TK Chemical and Fantagio Corp 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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.