Correlation Between Hana Materials and Tokai Carbon

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Can any of the company-specific risk be diversified away by investing in both Hana Materials and Tokai Carbon 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 Hana Materials and Tokai Carbon into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Hana Materials and Tokai Carbon Korea, you can compare the effects of market volatilities on Hana Materials and Tokai Carbon 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 Hana Materials with a short position of Tokai Carbon. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hana Materials and Tokai Carbon.

Diversification Opportunities for Hana Materials and Tokai Carbon

0.98
  Correlation Coefficient

Almost no diversification

The 3 months correlation between Hana and Tokai is 0.98. Overlapping area represents the amount of risk that can be diversified away by holding Hana Materials and Tokai Carbon Korea in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tokai Carbon Korea and Hana Materials 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 Hana Materials are associated (or correlated) with Tokai Carbon. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tokai Carbon Korea has no effect on the direction of Hana Materials i.e., Hana Materials and Tokai Carbon go up and down completely randomly.

Pair Corralation between Hana Materials and Tokai Carbon

Assuming the 90 days trading horizon Hana Materials is expected to under-perform the Tokai Carbon. In addition to that, Hana Materials is 1.15 times more volatile than Tokai Carbon Korea. It trades about -0.17 of its total potential returns per unit of risk. Tokai Carbon Korea is currently generating about -0.19 per unit of volatility. If you would invest  9,030,000  in Tokai Carbon Korea on September 6, 2024 and sell it today you would lose (2,150,000) from holding Tokai Carbon Korea or give up 23.81% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Strong
Accuracy98.31%
ValuesDaily Returns

Hana Materials  vs.  Tokai Carbon Korea

 Performance 
       Timeline  
Hana Materials 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Hana Materials 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.
Tokai Carbon Korea 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Tokai Carbon Korea 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.

Hana Materials and Tokai Carbon Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Hana Materials and Tokai Carbon

The main advantage of trading using opposite Hana Materials and Tokai Carbon positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Hana Materials position performs unexpectedly, Tokai Carbon 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 Tokai Carbon will offset losses from the drop in Tokai Carbon's long position.
The idea behind Hana Materials and Tokai Carbon Korea 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.
Check out your portfolio center.
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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.

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