Correlation Between PJ Metal and TK Chemical

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

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

Diversification Opportunities for PJ Metal and TK Chemical

0.22

Correlation Coefficient

PJ Metal  TK Chemical

Modest diversification

The 3 months correlation between 128660 and 104480 is 0.22. Overlapping area represents the amount of risk that can be diversified away by holding PJ Metal Co and TK Chemical in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TK Chemical and PJ Metal 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 PJ Metal Co 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 PJ Metal i.e., PJ Metal and TK Chemical go up and down completely randomly.

Pair Corralation between PJ Metal and TK Chemical

Assuming the 90 days trading horizon PJ Metal Co is expected to generate 1.18 times more return on investment than TK Chemical. However, PJ Metal is 1.18 times more volatile than TK Chemical. It trades about 0.0 of its potential returns per unit of risk. TK Chemical is currently generating about -0.01 per unit of risk. If you would invest  340,202  in PJ Metal Co on October 9, 2024 and sell it today you would lose (38,702) from holding PJ Metal Co or give up 11.38% of portfolio value over 90 days.

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

PJ Metal Co  vs.  TK Chemical

PJ Metal

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days PJ Metal Co 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.

TK Chemical

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in TK Chemical are ranked lower than 6 (%) 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.

Pair Trading with PJ Metal and TK Chemical

The main advantage of trading using opposite PJ Metal and TK Chemical positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if PJ Metal 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 PJ Metal Co 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.