Correlation Between Tokai Carbon and Microfriend
Can any of the company-specific risk be diversified away by investing in both Tokai Carbon and Microfriend 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 Tokai Carbon and Microfriend into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Tokai Carbon Korea and Microfriend, you can compare the effects of market volatilities on Tokai Carbon and Microfriend 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 Tokai Carbon with a short position of Microfriend. Check out your portfolio center. Please also check ongoing floating volatility patterns of Tokai Carbon and Microfriend.
Diversification Opportunities for Tokai Carbon and Microfriend
0.33 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Tokai and Microfriend is 0.33. Overlapping area represents the amount of risk that can be diversified away by holding Tokai Carbon Korea and Microfriend in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Microfriend and Tokai Carbon 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 Tokai Carbon Korea are associated (or correlated) with Microfriend. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Microfriend has no effect on the direction of Tokai Carbon i.e., Tokai Carbon and Microfriend go up and down completely randomly.
Pair Corralation between Tokai Carbon and Microfriend
Assuming the 90 days trading horizon Tokai Carbon Korea is expected to generate 0.95 times more return on investment than Microfriend. However, Tokai Carbon Korea is 1.05 times less risky than Microfriend. It trades about 0.28 of its potential returns per unit of risk. Microfriend is currently generating about 0.2 per unit of risk. If you would invest 7,380,000 in Tokai Carbon Korea on November 27, 2024 and sell it today you would earn a total of 1,470,000 from holding Tokai Carbon Korea or generate 19.92% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Tokai Carbon Korea vs. Microfriend
Performance |
| Timeline |
| Tokai Carbon Korea |
| Microfriend |
Tokai Carbon and Microfriend Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Tokai Carbon and Microfriend
The main advantage of trading using opposite Tokai Carbon and Microfriend positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Tokai Carbon position performs unexpectedly, Microfriend 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 Microfriend will offset losses from the drop in Microfriend's long position.| Tokai Carbon vs. LEENO Industrial | Tokai Carbon vs. Wonik Ips Co | Tokai Carbon vs. Dongjin Semichem Co | Tokai Carbon vs. Hana Materials |
| Microfriend vs. LG Household Healthcare | Microfriend vs. Seoul Electronics Telecom | Microfriend vs. Kisan Telecom Co | Microfriend vs. Korea Information Communications |
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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.
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