Correlation Between TK Chemical and LegoChem Biosciences
Can any of the company-specific risk be diversified away by investing in both TK Chemical and LegoChem Biosciences 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 LegoChem Biosciences into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between TK Chemical and LegoChem Biosciences, you can compare the effects of market volatilities on TK Chemical and LegoChem Biosciences 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 LegoChem Biosciences. Check out your portfolio center. Please also check ongoing floating volatility patterns of TK Chemical and LegoChem Biosciences.
Diversification Opportunities for TK Chemical and LegoChem Biosciences
0.23 | Correlation Coefficient |
Modest diversification
The 3 months correlation between 104480 and LegoChem is 0.23. Overlapping area represents the amount of risk that can be diversified away by holding TK Chemical and LegoChem Biosciences in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LegoChem Biosciences 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 LegoChem Biosciences. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of LegoChem Biosciences has no effect on the direction of TK Chemical i.e., TK Chemical and LegoChem Biosciences go up and down completely randomly.
Pair Corralation between TK Chemical and LegoChem Biosciences
Assuming the 90 days trading horizon TK Chemical is expected to under-perform the LegoChem Biosciences. But the stock apears to be less risky and, when comparing its historical volatility, TK Chemical is 1.64 times less risky than LegoChem Biosciences. The stock trades about -0.06 of its potential returns per unit of risk. The LegoChem Biosciences is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest 3,980,000 in LegoChem Biosciences on September 4, 2024 and sell it today you would earn a total of 5,810,000 from holding LegoChem Biosciences or generate 145.98% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
TK Chemical vs. LegoChem Biosciences
Performance |
| Timeline |
| TK Chemical |
| LegoChem Biosciences |
TK Chemical and LegoChem Biosciences Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with TK Chemical and LegoChem Biosciences
The main advantage of trading using opposite TK Chemical and LegoChem Biosciences positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if TK Chemical position performs unexpectedly, LegoChem Biosciences 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 LegoChem Biosciences will offset losses from the drop in LegoChem Biosciences' long position.| TK Chemical vs. Korea Real Estate | TK Chemical vs. Busan Industrial Co | TK Chemical vs. UNISEM Co | TK Chemical vs. RPBio Inc |
| LegoChem Biosciences vs. Sungwoo Electronics Co | LegoChem Biosciences vs. Automobile Pc | LegoChem Biosciences vs. Kukdong Oil Chemicals | LegoChem Biosciences vs. Namhae Chemical |
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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.
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