Correlation Between SFA Engineering and Tokai Carbon
Can any of the company-specific risk be diversified away by investing in both SFA Engineering and Tokai Carbon 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 SFA Engineering and Tokai Carbon into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between SFA Engineering and Tokai Carbon Korea, you can compare the effects of market volatilities on SFA Engineering and Tokai Carbon 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 SFA Engineering with a short position of Tokai Carbon. Check out your portfolio center. Please also check ongoing floating volatility patterns of SFA Engineering and Tokai Carbon.
Diversification Opportunities for SFA Engineering and Tokai Carbon
0.35 | Correlation Coefficient |
Weak diversification
The 3 months correlation between SFA and Tokai is 0.35. Overlapping area represents the amount of risk that can be diversified away by holding SFA Engineering and Tokai Carbon Korea in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tokai Carbon Korea and SFA Engineering 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 SFA Engineering are associated (or correlated) with Tokai Carbon. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tokai Carbon Korea has no effect on the direction of SFA Engineering i.e., SFA Engineering and Tokai Carbon go up and down completely randomly.
Pair Corralation between SFA Engineering and Tokai Carbon
Assuming the 90 days trading horizon SFA Engineering is expected to generate 1.51 times more return on investment than Tokai Carbon. However, SFA Engineering is 1.51 times more volatile than Tokai Carbon Korea. It trades about -0.04 of its potential returns per unit of risk. Tokai Carbon Korea is currently generating about -0.29 per unit of risk. If you would invest 2,115,000 in SFA Engineering on August 26, 2024 and sell it today you would lose (90,000) from holding SFA Engineering or give up 4.26% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
SFA Engineering vs. Tokai Carbon Korea
Performance |
| Timeline |
| SFA Engineering |
| Tokai Carbon Korea |
SFA Engineering and Tokai Carbon Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with SFA Engineering and Tokai Carbon
The main advantage of trading using opposite SFA Engineering and Tokai Carbon positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SFA Engineering position performs unexpectedly, Tokai Carbon 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 Tokai Carbon will offset losses from the drop in Tokai Carbon's long position.The idea behind SFA Engineering and Tokai Carbon Korea 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.| Tokai Carbon vs. SK Hynix | Tokai Carbon vs. People Technology | Tokai Carbon vs. SIMMTECH Co | Tokai Carbon vs. Haesung DS 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 Portfolio File Import module to quickly import all of your third-party portfolios from your local drive in csv format.
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