Correlation Between RF Materials and Tokai Carbon
Can any of the company-specific risk be diversified away by investing in both RF Materials and Tokai Carbon 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 RF Materials and Tokai Carbon into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between RF Materials Co and Tokai Carbon Korea, you can compare the effects of market volatilities on RF Materials and Tokai Carbon 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 RF Materials with a short position of Tokai Carbon. Check out your portfolio center. Please also check ongoing floating volatility patterns of RF Materials and Tokai Carbon.
Diversification Opportunities for RF Materials and Tokai Carbon
0.67 | Correlation Coefficient |
Poor diversification
The 3 months correlation between 327260 and Tokai is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding RF Materials Co and Tokai Carbon Korea in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tokai Carbon Korea and RF Materials 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 RF Materials Co are associated (or correlated) with Tokai Carbon. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tokai Carbon Korea has no effect on the direction of RF Materials i.e., RF Materials and Tokai Carbon go up and down completely randomly.
Pair Corralation between RF Materials and Tokai Carbon
Assuming the 90 days trading horizon RF Materials Co is expected to generate 2.23 times more return on investment than Tokai Carbon. However, RF Materials is 2.23 times more volatile than Tokai Carbon Korea. It trades about -0.13 of its potential returns per unit of risk. Tokai Carbon Korea is currently generating about -0.43 per unit of risk. If you would invest 629,000 in RF Materials Co on September 1, 2024 and sell it today you would lose (87,000) from holding RF Materials Co or give up 13.83% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 95.65% |
| Values | Daily Returns |
RF Materials Co vs. Tokai Carbon Korea
Performance |
| Timeline |
| RF Materials |
| Tokai Carbon Korea |
RF Materials and Tokai Carbon Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with RF Materials and Tokai Carbon
The main advantage of trading using opposite RF Materials and Tokai Carbon positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if RF Materials position performs unexpectedly, Tokai Carbon 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 Tokai Carbon will offset losses from the drop in Tokai Carbon's long position.| RF Materials vs. SK Hynix | RF Materials vs. LX Semicon Co | RF Materials vs. Tokai Carbon Korea | RF Materials vs. People Technology |
| Tokai Carbon vs. SK Hynix | Tokai Carbon vs. LX Semicon Co | Tokai Carbon vs. People Technology | Tokai Carbon vs. SIMMTECH 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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