Correlation Between TDK and Plug Power

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

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

Diversification Opportunities for TDK and Plug Power

-0.18

Correlation Coefficient

TDK  Plug Power

Good diversification

The 3 months correlation between TDK and Plug is -0.18. Overlapping area represents the amount of risk that can be diversified away by holding TDK Corp. and Plug Power in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Plug Power 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 Plug Power. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Plug Power has no effect on the direction of TDK i.e., TDK and Plug Power go up and down completely randomly.

Pair Corralation between TDK and Plug Power

Assuming the 90 days horizon TDK is expected to generate 1.75 times less return on investment than Plug Power. But when comparing it to its historical volatility, TDK Corporation is 3.42 times less risky than Plug Power. It trades about 0.18 of its potential returns per unit of risk. Plug Power is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  191.00  in Plug Power on September 2, 2024 and sell it today you would earn a total of  18.00  from holding Plug Power or generate 9.42% return on investment over 90 days.

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

TDK Corp.  vs.  Plug Power

TDK Corporation

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days TDK Corporation has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, TDK is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Plug Power

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Plug Power are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Plug Power reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with TDK and Plug Power

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

The idea behind TDK Corporation and Plug Power 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.