Correlation Between TKH Group and CM NV

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

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

Diversification Opportunities for TKH Group and CM NV

0.67

Correlation Coefficient

TKH Group  CM NV

Poor diversification

The 3 months correlation between TKH and CMCOM is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding TKH Group NV and CM NV in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CM NV and TKH Group 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 TKH Group NV are associated (or correlated) with CM NV. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CM NV has no effect on the direction of TKH Group i.e., TKH Group and CM NV go up and down completely randomly.

Pair Corralation between TKH Group and CM NV

Assuming the 90 days trading horizon TKH Group is expected to generate 1.42 times less return on investment than CM NV. But when comparing it to its historical volatility, TKH Group NV is 1.95 times less risky than CM NV. It trades about 0.28 of its potential returns per unit of risk. CM NV is currently generating about 0.2 of returns per unit of risk over similar time horizon. If you would invest  551.00  in CM NV on October 24, 2024 and sell it today you would earn a total of  42.00  from holding CM NV or generate 7.62% return on investment over 90 days.

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

TKH Group NV  vs.  CM NV

TKH Group NV

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days TKH Group NV has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, TKH Group is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.

CM NV

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days CM NV has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest uncertain performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with TKH Group and CM NV

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

The idea behind TKH Group NV and CM NV 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.