Correlation Between Tokai Carbon and Sherwin Williams

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Can any of the company-specific risk be diversified away by investing in both Tokai Carbon and Sherwin Williams 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 Tokai Carbon and Sherwin Williams into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Tokai Carbon Co and Sherwin Williams Co, you can compare the effects of market volatilities on Tokai Carbon and Sherwin Williams 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 Tokai Carbon with a short position of Sherwin Williams. Check out your portfolio center. Please also check ongoing floating volatility patterns of Tokai Carbon and Sherwin Williams.

Diversification Opportunities for Tokai Carbon and Sherwin Williams

-0.76
  Correlation Coefficient

Pay attention - limited upside

The 3 months correlation between Tokai and Sherwin is -0.76. Overlapping area represents the amount of risk that can be diversified away by holding Tokai Carbon Co and Sherwin-Williams Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sherwin-Williams and Tokai Carbon 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 Tokai Carbon Co are associated (or correlated) with Sherwin Williams. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sherwin-Williams has no effect on the direction of Tokai Carbon i.e., Tokai Carbon and Sherwin Williams go up and down completely randomly.

Pair Corralation between Tokai Carbon and Sherwin Williams

Assuming the 90 days horizon Tokai Carbon Co is expected to under-perform the Sherwin Williams. But the pink sheet apears to be less risky and, when comparing its historical volatility, Tokai Carbon Co is 1.41 times less risky than Sherwin Williams. The pink sheet trades about -0.03 of its potential returns per unit of risk. The Sherwin Williams Co is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  27,167  in Sherwin Williams Co on December 30, 2023 and sell it today you would earn a total of  7,566  from holding Sherwin Williams Co or generate 27.85% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthWeak
Accuracy100.0%
ValuesDaily Returns

Tokai Carbon Co  vs.  Sherwin-Williams Co

 Performance 
       Timeline  
Tokai Carbon 

Risk-Adjusted Performance

0 of 100

 
Low
 
High
Very Weak
Over the last 90 days Tokai Carbon Co has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of abnormal performance in the last few months, the Stock's fundamental drivers remain fairly strong which may send shares a bit higher in April 2024. The current disturbance may also be a sign of long term up-swing for the company investors.
Sherwin-Williams 

Risk-Adjusted Performance

16 of 100

 
Low
 
High
Good
Compared to the overall equity markets, risk-adjusted returns on investments in Sherwin Williams Co are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unsteady technical indicators, Sherwin Williams showed solid returns over the last few months and may actually be approaching a breakup point.

Tokai Carbon and Sherwin Williams Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Tokai Carbon and Sherwin Williams

The main advantage of trading using opposite Tokai Carbon and Sherwin Williams positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Tokai Carbon position performs unexpectedly, Sherwin Williams 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 Sherwin Williams will offset losses from the drop in Sherwin Williams' long position.
The idea behind Tokai Carbon Co and Sherwin Williams Co 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.
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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.

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