Correlation Between Tate Lyle and Kikkoman

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

Diversification Opportunities for Tate Lyle and Kikkoman

0.5
  Correlation Coefficient

Very weak diversification

The 3 months correlation between Tate and Kikkoman is 0.5. Overlapping area represents the amount of risk that can be diversified away by holding Tate Lyle PLC and Kikkoman in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kikkoman and Tate Lyle 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 Tate Lyle PLC are associated (or correlated) with Kikkoman. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kikkoman has no effect on the direction of Tate Lyle i.e., Tate Lyle and Kikkoman go up and down completely randomly.

Pair Corralation between Tate Lyle and Kikkoman

Assuming the 90 days horizon Tate Lyle PLC is expected to generate 0.03 times more return on investment than Kikkoman. However, Tate Lyle PLC is 35.19 times less risky than Kikkoman. It trades about 0.06 of its potential returns per unit of risk. Kikkoman is currently generating about -0.29 per unit of risk. If you would invest  3,082  in Tate Lyle PLC on December 30, 2023 and sell it today you would earn a total of  49.00  from holding Tate Lyle PLC or generate 1.59% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthWeak
Accuracy100.0%
ValuesDaily Returns

Tate Lyle PLC  vs.  Kikkoman

 Performance 
       Timeline  
Tate Lyle PLC 

Risk-Adjusted Performance

0 of 100

 
Low
 
High
Very Weak
Over the last 90 days Tate Lyle PLC has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, Tate Lyle is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.
Kikkoman 

Risk-Adjusted Performance

5 of 100

 
Low
 
High
Modest
Compared to the overall equity markets, risk-adjusted returns on investments in Kikkoman are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Kikkoman reported solid returns over the last few months and may actually be approaching a breakup point.

Tate Lyle and Kikkoman Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Tate Lyle and Kikkoman

The main advantage of trading using opposite Tate Lyle and Kikkoman positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Tate Lyle position performs unexpectedly, Kikkoman 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 Kikkoman will offset losses from the drop in Kikkoman's long position.
The idea behind Tate Lyle PLC and Kikkoman 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.

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