Correlation Between THK Co and Amaero International

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

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

Diversification Opportunities for THK Co and Amaero International

-0.56

Correlation Coefficient

THK Co  Amaero International

Excellent diversification

The 3 months correlation between THK and Amaero is -0.56. Overlapping area represents the amount of risk that can be diversified away by holding THK Co Ltd and Amaero International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Amaero International and THK Co 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 THK Co Ltd are associated (or correlated) with Amaero International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Amaero International has no effect on the direction of THK Co i.e., THK Co and Amaero International go up and down completely randomly.

Pair Corralation between THK Co and Amaero International

Assuming the 90 days horizon THK Co Ltd is expected to generate 0.43 times more return on investment than Amaero International. However, THK Co Ltd is 2.32 times less risky than Amaero International. It trades about 0.09 of its potential returns per unit of risk. Amaero International is currently generating about -0.29 per unit of risk. If you would invest  1,123  in THK Co Ltd on September 15, 2024 and sell it today you would earn a total of  44.00  from holding THK Co Ltd or generate 3.92% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	95.45%
Values	Daily Returns

THK Co Ltd  vs.  Amaero International

THK Co

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in THK Co Ltd are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of fairly fragile essential indicators, THK Co showed solid returns over the last few months and may actually be approaching a breakup point.

Amaero International

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Amaero International has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with THK Co and Amaero International

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

The idea behind THK Co Ltd and Amaero International 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.