Correlation Between TOPMATERIAL and Taewoong Logistics

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

By analyzing existing cross correlation between TOPMATERIAL LTD and Taewoong Logistics CoLtd, you can compare the effects of market volatilities on TOPMATERIAL and Taewoong Logistics 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 TOPMATERIAL with a short position of Taewoong Logistics. Check out your portfolio center. Please also check ongoing floating volatility patterns of TOPMATERIAL and Taewoong Logistics.

Diversification Opportunities for TOPMATERIAL and Taewoong Logistics

0.03

Correlation Coefficient

TOPMATERIAL  Taewoong Logistics

Significant diversification

The 3 months correlation between TOPMATERIAL and Taewoong is 0.03. Overlapping area represents the amount of risk that can be diversified away by holding TOPMATERIAL LTD and Taewoong Logistics CoLtd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Taewoong Logistics CoLtd and TOPMATERIAL 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 TOPMATERIAL LTD are associated (or correlated) with Taewoong Logistics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Taewoong Logistics CoLtd has no effect on the direction of TOPMATERIAL i.e., TOPMATERIAL and Taewoong Logistics go up and down completely randomly.

Pair Corralation between TOPMATERIAL and Taewoong Logistics

Assuming the 90 days trading horizon TOPMATERIAL LTD is expected to generate 1.68 times more return on investment than Taewoong Logistics. However, TOPMATERIAL is 1.68 times more volatile than Taewoong Logistics CoLtd. It trades about 0.01 of its potential returns per unit of risk. Taewoong Logistics CoLtd is currently generating about -0.02 per unit of risk. If you would invest  3,455,000  in TOPMATERIAL LTD on October 24, 2024 and sell it today you would lose (650,000) from holding TOPMATERIAL LTD or give up 18.81% of portfolio value over 90 days.

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

TOPMATERIAL LTD  vs.  Taewoong Logistics CoLtd

TOPMATERIAL LTD

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days TOPMATERIAL LTD 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 February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Taewoong Logistics CoLtd

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Taewoong Logistics CoLtd are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Taewoong Logistics may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with TOPMATERIAL and Taewoong Logistics

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

The idea behind TOPMATERIAL LTD and Taewoong Logistics CoLtd 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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.