Correlation Between Paradise and Tae Kwang
Can any of the company-specific risk be diversified away by investing in both Paradise and Tae Kwang 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 Paradise and Tae Kwang into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Paradise Co and Tae Kwang, you can compare the effects of market volatilities on Paradise and Tae Kwang 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 Paradise with a short position of Tae Kwang. Check out your portfolio center. Please also check ongoing floating volatility patterns of Paradise and Tae Kwang.
Diversification Opportunities for Paradise and Tae Kwang
Significant diversification
The 3 months correlation between Paradise and Tae is 0.04. Overlapping area represents the amount of risk that can be diversified away by holding Paradise Co and Tae Kwang in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tae Kwang and Paradise 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 Paradise Co are associated (or correlated) with Tae Kwang. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tae Kwang has no effect on the direction of Paradise i.e., Paradise and Tae Kwang go up and down completely randomly.
Pair Corralation between Paradise and Tae Kwang
Assuming the 90 days trading horizon Paradise Co is expected to under-perform the Tae Kwang. But the stock apears to be less risky and, when comparing its historical volatility, Paradise Co is 1.79 times less risky than Tae Kwang. The stock trades about -0.12 of its potential returns per unit of risk. The Tae Kwang is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest 1,170,000 in Tae Kwang on August 28, 2024 and sell it today you would earn a total of 480,000 from holding Tae Kwang or generate 41.03% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Paradise Co vs. Tae Kwang
Performance |
| Timeline |
| Paradise |
| Tae Kwang |
Paradise and Tae Kwang Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Paradise and Tae Kwang
The main advantage of trading using opposite Paradise and Tae Kwang positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Paradise position performs unexpectedly, Tae Kwang 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 Tae Kwang will offset losses from the drop in Tae Kwang's long position.The idea behind Paradise Co and Tae Kwang 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.| Tae Kwang vs. Sung Kwang Bend | Tae Kwang vs. Taewoong CoLtd | Tae Kwang vs. SFA Engineering | Tae Kwang vs. Soulbrain Holdings Co |
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 Equity Valuation module to check real value of public entities based on technical and fundamental data.
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