Correlation Between KB No4 and TK Chemical
Can any of the company-specific risk be diversified away by investing in both KB No4 and TK Chemical 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 KB No4 and TK Chemical into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between KB No4 SPAC and TK Chemical, you can compare the effects of market volatilities on KB No4 and TK Chemical 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 KB No4 with a short position of TK Chemical. Check out your portfolio center. Please also check ongoing floating volatility patterns of KB No4 and TK Chemical.
Diversification Opportunities for KB No4 and TK Chemical
0.2 | Correlation Coefficient |
Modest diversification
The 3 months correlation between 205500 and 104480 is 0.2. Overlapping area represents the amount of risk that can be diversified away by holding KB No4 SPAC and TK Chemical in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TK Chemical and KB No4 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 KB No4 SPAC are associated (or correlated) with TK Chemical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of TK Chemical has no effect on the direction of KB No4 i.e., KB No4 and TK Chemical go up and down completely randomly.
Pair Corralation between KB No4 and TK Chemical
Assuming the 90 days trading horizon KB No4 SPAC is expected to generate 1.82 times more return on investment than TK Chemical. However, KB No4 is 1.82 times more volatile than TK Chemical. It trades about 0.11 of its potential returns per unit of risk. TK Chemical is currently generating about -0.15 per unit of risk. If you would invest 104,800 in KB No4 SPAC on September 13, 2024 and sell it today you would earn a total of 14,100 from holding KB No4 SPAC or generate 13.45% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 97.73% |
| Values | Daily Returns |
KB No4 SPAC vs. TK Chemical
Performance |
| Timeline |
| KB No4 SPAC |
| TK Chemical |
KB No4 and TK Chemical Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with KB No4 and TK Chemical
The main advantage of trading using opposite KB No4 and TK Chemical positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if KB No4 position performs unexpectedly, TK Chemical 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 TK Chemical will offset losses from the drop in TK Chemical's long position.| KB No4 vs. Daishin Information Communications | KB No4 vs. Inzi Display CoLtd | KB No4 vs. Organic Special Pet | KB No4 vs. Iljin Display |
| TK Chemical vs. BooKook Steel Co | TK Chemical vs. Dongbang Transport Logistics | TK Chemical vs. Hironic Co | TK Chemical vs. J Steel 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 Transaction History module to view history of all your transactions and understand their impact on performance.
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