Correlation Between TK Chemical and SH Energy
Can any of the company-specific risk be diversified away by investing in both TK Chemical and SH Energy 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 TK Chemical and SH Energy into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between TK Chemical and SH Energy Chemical, you can compare the effects of market volatilities on TK Chemical and SH Energy 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 TK Chemical with a short position of SH Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of TK Chemical and SH Energy.
Diversification Opportunities for TK Chemical and SH Energy
0.03 | Correlation Coefficient |
Significant diversification
The 3 months correlation between 104480 and 002360 is 0.03. Overlapping area represents the amount of risk that can be diversified away by holding TK Chemical and SH Energy Chemical in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SH Energy Chemical and TK Chemical 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 TK Chemical are associated (or correlated) with SH Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SH Energy Chemical has no effect on the direction of TK Chemical i.e., TK Chemical and SH Energy go up and down completely randomly.
Pair Corralation between TK Chemical and SH Energy
Assuming the 90 days trading horizon TK Chemical is expected to under-perform the SH Energy. But the stock apears to be less risky and, when comparing its historical volatility, TK Chemical is 1.39 times less risky than SH Energy. The stock trades about -0.07 of its potential returns per unit of risk. The SH Energy Chemical is currently generating about -0.02 of returns per unit of risk over similar time horizon. If you would invest 64,700 in SH Energy Chemical on August 25, 2024 and sell it today you would lose (10,200) from holding SH Energy Chemical or give up 15.77% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
TK Chemical vs. SH Energy Chemical
Performance |
| Timeline |
| TK Chemical |
| SH Energy Chemical |
TK Chemical and SH Energy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with TK Chemical and SH Energy
The main advantage of trading using opposite TK Chemical and SH Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if TK Chemical position performs unexpectedly, SH Energy 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 SH Energy will offset losses from the drop in SH Energy's long position.| TK Chemical vs. Busan Industrial Co | TK Chemical vs. Busan Ind | TK Chemical vs. Mirae Asset Daewoo | TK Chemical vs. UNISEM Co |
| SH Energy vs. Korea Information Communications | SH Energy vs. Automobile Pc | SH Energy vs. Daiyang Metal Co | SH Energy vs. Mobile Appliance |
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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.
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