Correlation Between NGK Insulators and THK Co

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

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

Diversification Opportunities for NGK Insulators and THK Co

-0.02

Correlation Coefficient

NGK Insulators  THK Co

Good diversification

The 3 months correlation between NGK and THK is -0.02. Overlapping area represents the amount of risk that can be diversified away by holding NGK Insulators and THK Co Ltd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on THK Co and NGK Insulators 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 NGK Insulators are associated (or correlated) with THK Co. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of THK Co has no effect on the direction of NGK Insulators i.e., NGK Insulators and THK Co go up and down completely randomly.

Pair Corralation between NGK Insulators and THK Co

Assuming the 90 days horizon NGK Insulators is expected to generate 3.34 times less return on investment than THK Co. In addition to that, NGK Insulators is 1.19 times more volatile than THK Co Ltd. It trades about 0.02 of its total potential returns per unit of risk. THK Co Ltd is currently generating about 0.1 per unit of volatility. If you would invest  1,164  in THK Co Ltd on December 20, 2024 and sell it today you would earn a total of  135.00  from holding THK Co Ltd or generate 11.6% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.33%
Values	Daily Returns

NGK Insulators  vs.  THK Co Ltd

NGK Insulators

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in NGK Insulators are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable forward indicators, NGK Insulators is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

THK Co

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in THK Co Ltd are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak essential indicators, THK Co showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with NGK Insulators and THK Co

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

The idea behind NGK Insulators and THK Co Ltd 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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.