Correlation Between Rotork Plc and THK Co

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

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

Diversification Opportunities for Rotork Plc and THK Co

0.29

Correlation Coefficient

Rotork Plc  THK Co

Modest diversification

The 3 months correlation between Rotork and THK is 0.29. Overlapping area represents the amount of risk that can be diversified away by holding Rotork plc and THK Co Ltd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on THK Co and Rotork Plc 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 Rotork plc 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 Rotork Plc i.e., Rotork Plc and THK Co go up and down completely randomly.

Pair Corralation between Rotork Plc and THK Co

Assuming the 90 days horizon Rotork plc is expected to generate 2.32 times more return on investment than THK Co. However, Rotork Plc is 2.32 times more volatile than THK Co Ltd. It trades about 0.05 of its potential returns per unit of risk. THK Co Ltd is currently generating about 0.08 per unit of risk. If you would invest  377.00  in Rotork plc on December 27, 2024 and sell it today you would earn a total of  29.00  from holding Rotork plc or generate 7.69% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	95.08%
Values	Daily Returns

Rotork plc  vs.  THK Co Ltd

Rotork plc

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Rotork plc are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak basic indicators, Rotork Plc reported solid returns over the last few months and may actually be approaching a breakup point.

THK Co

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in THK Co Ltd are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of fairly fragile essential indicators, THK Co may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Rotork Plc and THK Co

The main advantage of trading using opposite Rotork Plc and THK Co positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Rotork Plc 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 Rotork plc 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.

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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.