Correlation Between TKH Group and NX Filtration

Can any of the company-specific risk be diversified away by investing in both TKH Group and NX Filtration 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 NX Filtration 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 NX Filtration Holding, you can compare the effects of market volatilities on TKH Group and NX Filtration 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 NX Filtration. Check out your portfolio center. Please also check ongoing floating volatility patterns of TKH Group and NX Filtration.

Diversification Opportunities for TKH Group and NX Filtration

0.66

Correlation Coefficient

TKH Group  NX Filtration

Poor diversification

The 3 months correlation between TKH and NXFIL is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding TKH Group NV and NX Filtration Holding in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NX Filtration Holding 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 NX Filtration. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NX Filtration Holding has no effect on the direction of TKH Group i.e., TKH Group and NX Filtration go up and down completely randomly.

Pair Corralation between TKH Group and NX Filtration

Assuming the 90 days trading horizon TKH Group NV is expected to generate 0.65 times more return on investment than NX Filtration. However, TKH Group NV is 1.53 times less risky than NX Filtration. It trades about -0.07 of its potential returns per unit of risk. NX Filtration Holding is currently generating about -0.13 per unit of risk. If you would invest  3,778  in TKH Group NV on October 9, 2024 and sell it today you would lose (352.00) from holding TKH Group NV or give up 9.32% of portfolio value over 90 days.

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

TKH Group NV  vs.  NX Filtration Holding

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 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.

NX Filtration Holding

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days NX Filtration Holding has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with TKH Group and NX Filtration

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

The idea behind TKH Group NV and NX Filtration Holding 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.