Correlation Between INNOX Advanced and Tokai Carbon

Can any of the company-specific risk be diversified away by investing in both INNOX Advanced 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 INNOX Advanced and Tokai Carbon into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between INNOX Advanced Materials and Tokai Carbon Korea, you can compare the effects of market volatilities on INNOX Advanced 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 INNOX Advanced with a short position of Tokai Carbon. Check out your portfolio center. Please also check ongoing floating volatility patterns of INNOX Advanced and Tokai Carbon.

Diversification Opportunities for INNOX Advanced and Tokai Carbon

0.61

Correlation Coefficient

INNOX Advanced  Tokai Carbon

Poor diversification

The 3 months correlation between INNOX and Tokai is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding INNOX Advanced 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 INNOX Advanced 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 INNOX Advanced 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 INNOX Advanced i.e., INNOX Advanced and Tokai Carbon go up and down completely randomly.

Pair Corralation between INNOX Advanced and Tokai Carbon

Assuming the 90 days trading horizon INNOX Advanced is expected to generate 1.22 times less return on investment than Tokai Carbon. In addition to that, INNOX Advanced is 1.12 times more volatile than Tokai Carbon Korea. It trades about 0.13 of its total potential returns per unit of risk. Tokai Carbon Korea is currently generating about 0.18 per unit of volatility. If you would invest  6,850,514  in Tokai Carbon Korea on December 23, 2024 and sell it today you would earn a total of  2,219,486  from holding Tokai Carbon Korea or generate 32.4% return on investment over 90 days.

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

INNOX Advanced Materials  vs.  Tokai Carbon Korea

INNOX Advanced Materials

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in INNOX Advanced Materials are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, INNOX Advanced sustained solid returns over the last few months and may actually be approaching a breakup point.

Tokai Carbon Korea

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Tokai Carbon Korea are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Tokai Carbon sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with INNOX Advanced and Tokai Carbon

The main advantage of trading using opposite INNOX Advanced and Tokai Carbon positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if INNOX Advanced 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 INNOX Advanced 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.

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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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.