Correlation Between Kikkoman and Tate Lyle

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

Diversification Opportunities for Kikkoman and Tate Lyle

0.44
  Correlation Coefficient

Very weak diversification

The 3 months correlation between Kikkoman and Tate is 0.44. Overlapping area represents the amount of risk that can be diversified away by holding Kikkoman and Tate Lyle PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tate Lyle PLC and Kikkoman 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 Kikkoman are associated (or correlated) with Tate Lyle. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tate Lyle PLC has no effect on the direction of Kikkoman i.e., Kikkoman and Tate Lyle go up and down completely randomly.

Pair Corralation between Kikkoman and Tate Lyle

Assuming the 90 days horizon Kikkoman is expected to under-perform the Tate Lyle. In addition to that, Kikkoman is 57.78 times more volatile than Tate Lyle PLC. It trades about -0.28 of its total potential returns per unit of risk. Tate Lyle PLC is currently generating about 0.07 per unit of volatility. If you would invest  3,082  in Tate Lyle PLC on January 25, 2024 and sell it today you would earn a total of  118.00  from holding Tate Lyle PLC or generate 3.83% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthWeak
Accuracy97.62%
ValuesDaily Returns

Kikkoman  vs.  Tate Lyle PLC

 Performance 
       Timeline  
Kikkoman 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Kikkoman has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in May 2024. The current disturbance may also be a sign of long-run up-swing for the company stockholders.
Tate Lyle PLC 

Risk-Adjusted Performance

2 of 100

 
Weak
 
Strong
Weak
Compared to the overall equity markets, risk-adjusted returns on investments in Tate Lyle PLC are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong basic indicators, Tate Lyle is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Kikkoman and Tate Lyle Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Kikkoman and Tate Lyle

The main advantage of trading using opposite Kikkoman and Tate Lyle positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Kikkoman position performs unexpectedly, Tate Lyle 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 Tate Lyle will offset losses from the drop in Tate Lyle's long position.
The idea behind Kikkoman and Tate Lyle PLC 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.

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