Correlation Between Solution Advanced and Tae Kyung

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

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

Diversification Opportunities for Solution Advanced and Tae Kyung

0.71

Correlation Coefficient

Solution Advanced  Tae Kyung

Poor diversification

The 3 months correlation between Solution and Tae is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding Solution Advanced Technology and Tae Kyung Chemical in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tae Kyung Chemical and Solution 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 Solution Advanced Technology are associated (or correlated) with Tae Kyung. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tae Kyung Chemical has no effect on the direction of Solution Advanced i.e., Solution Advanced and Tae Kyung go up and down completely randomly.

Pair Corralation between Solution Advanced and Tae Kyung

Assuming the 90 days trading horizon Solution Advanced Technology is expected to generate 5.62 times more return on investment than Tae Kyung. However, Solution Advanced is 5.62 times more volatile than Tae Kyung Chemical. It trades about 0.19 of its potential returns per unit of risk. Tae Kyung Chemical is currently generating about 0.08 per unit of risk. If you would invest  137,600  in Solution Advanced Technology on December 24, 2024 and sell it today you would earn a total of  117,400  from holding Solution Advanced Technology or generate 85.32% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.28%
Values	Daily Returns

Solution Advanced Technology  vs.  Tae Kyung Chemical

Solution Advanced

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Solution Advanced Technology are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Solution Advanced sustained solid returns over the last few months and may actually be approaching a breakup point.

Tae Kyung Chemical

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Tae Kyung Chemical are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Tae Kyung is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Solution Advanced and Tae Kyung

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

The idea behind Solution Advanced Technology and Tae Kyung 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.

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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.