Correlation Between Tokai Carbon and RF Materials
Can any of the company-specific risk be diversified away by investing in both Tokai Carbon and RF Materials 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 RF Materials 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 RF Materials Co, you can compare the effects of market volatilities on Tokai Carbon and RF Materials 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 RF Materials. Check out your portfolio center. Please also check ongoing floating volatility patterns of Tokai Carbon and RF Materials.
Diversification Opportunities for Tokai Carbon and RF Materials
0.69 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Tokai and 327260 is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding Tokai Carbon Korea and RF Materials Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on RF Materials 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 RF Materials. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of RF Materials has no effect on the direction of Tokai Carbon i.e., Tokai Carbon and RF Materials go up and down completely randomly.
Pair Corralation between Tokai Carbon and RF Materials
Assuming the 90 days trading horizon Tokai Carbon is expected to generate 2.44 times less return on investment than RF Materials. In addition to that, Tokai Carbon is 1.07 times more volatile than RF Materials Co. It trades about 0.23 of its total potential returns per unit of risk. RF Materials Co is currently generating about 0.59 per unit of volatility. If you would invest 472,500 in RF Materials Co on October 25, 2024 and sell it today you would earn a total of 100,500 from holding RF Materials Co or generate 21.27% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Tokai Carbon Korea vs. RF Materials Co
Performance |
| Timeline |
| Tokai Carbon Korea |
| RF Materials |
Tokai Carbon and RF Materials Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Tokai Carbon and RF Materials
The main advantage of trading using opposite Tokai Carbon and RF Materials positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Tokai Carbon position performs unexpectedly, RF Materials 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 RF Materials will offset losses from the drop in RF Materials' long position.| Tokai Carbon vs. LEENO Industrial | Tokai Carbon vs. Wonik Ips Co | Tokai Carbon vs. Dongjin Semichem Co | Tokai Carbon vs. Hana Materials |
| RF Materials vs. SK Hynix | RF Materials vs. LX Semicon Co | RF Materials vs. Tokai Carbon Korea | RF Materials vs. People Technology |
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 Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.
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