Correlation Between Koppers Holdings and Toyobo Co

Can any of the company-specific risk be diversified away by investing in both Koppers Holdings and Toyobo Co 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 Koppers Holdings and Toyobo Co into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Koppers Holdings and Toyobo Co Ltd, you can compare the effects of market volatilities on Koppers Holdings and Toyobo Co 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 Koppers Holdings with a short position of Toyobo Co. Check out your portfolio center. Please also check ongoing floating volatility patterns of Koppers Holdings and Toyobo Co.

Diversification Opportunities for Koppers Holdings and Toyobo Co

0.45

Correlation Coefficient

Koppers Holdings  Toyobo Co

Very weak diversification

The 3 months correlation between Koppers and Toyobo is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding Koppers Holdings and Toyobo Co Ltd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Toyobo Co and Koppers Holdings 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 Koppers Holdings are associated (or correlated) with Toyobo Co. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Toyobo Co has no effect on the direction of Koppers Holdings i.e., Koppers Holdings and Toyobo Co go up and down completely randomly.

Pair Corralation between Koppers Holdings and Toyobo Co

Considering the 90-day investment horizon Koppers Holdings is expected to generate 2.46 times more return on investment than Toyobo Co. However, Koppers Holdings is 2.46 times more volatile than Toyobo Co Ltd. It trades about 0.06 of its potential returns per unit of risk. Toyobo Co Ltd is currently generating about -0.01 per unit of risk. If you would invest  2,474  in Koppers Holdings on February 14, 2024 and sell it today you would earn a total of  1,861  from holding Koppers Holdings or generate 75.22% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

Koppers Holdings  vs.  Toyobo Co Ltd

Koppers Holdings

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Koppers Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. Even with conflicting performance in the last few months, the Stock's basic indicators remain relatively invariable which may send shares a bit higher in June 2024. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

Toyobo Co

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Toyobo Co Ltd has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong fundamental drivers, Toyobo Co is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Koppers Holdings and Toyobo Co

The main advantage of trading using opposite Koppers Holdings and Toyobo Co positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Koppers Holdings position performs unexpectedly, Toyobo Co 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 Toyobo Co will offset losses from the drop in Toyobo Co's long position.

The idea behind Koppers Holdings and Toyobo Co Ltd pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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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.