Correlation Between TDK and Hubbell Incorporated

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

By analyzing existing cross correlation between TDK Corporation and Hubbell Incorporated, you can compare the effects of market volatilities on TDK and Hubbell Incorporated 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 TDK with a short position of Hubbell Incorporated. Check out your portfolio center. Please also check ongoing floating volatility patterns of TDK and Hubbell Incorporated.

Diversification Opportunities for TDK and Hubbell Incorporated

0.51

Correlation Coefficient

TDK  Hubbell Incorporated

Very weak diversification

The 3 months correlation between TDK and Hubbell is 0.51. Overlapping area represents the amount of risk that can be diversified away by holding TDK Corp. and Hubbell Incorporated in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hubbell Incorporated and TDK 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 TDK Corporation are associated (or correlated) with Hubbell Incorporated. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hubbell Incorporated has no effect on the direction of TDK i.e., TDK and Hubbell Incorporated go up and down completely randomly.

Pair Corralation between TDK and Hubbell Incorporated

Assuming the 90 days horizon TDK Corporation is expected to generate 1.03 times more return on investment than Hubbell Incorporated. However, TDK is 1.03 times more volatile than Hubbell Incorporated. It trades about 0.15 of its potential returns per unit of risk. Hubbell Incorporated is currently generating about 0.11 per unit of risk. If you would invest  1,198  in TDK Corporation on September 16, 2024 and sell it today you would earn a total of  65.00  from holding TDK Corporation or generate 5.43% return on investment over 90 days.

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

TDK Corp.  vs.  Hubbell Incorporated

TDK Corporation

Risk-Adjusted Performance

4 of 100

Insignificant

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

Hubbell Incorporated

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Hubbell Incorporated are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile technical and fundamental indicators, Hubbell Incorporated reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with TDK and Hubbell Incorporated

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

The idea behind TDK Corporation and Hubbell Incorporated 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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.