Correlation Between Kg Chemical and PJ Electronics

Can any of the company-specific risk be diversified away by investing in both Kg Chemical and PJ Electronics 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 Kg Chemical and PJ Electronics into the same portfolio, which is an essential part of the fundamental portfolio management process.

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

Diversification Opportunities for Kg Chemical and PJ Electronics

0.72

Correlation Coefficient

Kg Chemical  PJ Electronics

Poor diversification

The 3 months correlation between 001390 and 006140 is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding Kg Chemical and PJ Electronics Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PJ Electronics and Kg Chemical 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 Kg Chemical are associated (or correlated) with PJ Electronics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PJ Electronics has no effect on the direction of Kg Chemical i.e., Kg Chemical and PJ Electronics go up and down completely randomly.

Pair Corralation between Kg Chemical and PJ Electronics

Assuming the 90 days trading horizon Kg Chemical is expected to under-perform the PJ Electronics. But the stock apears to be less risky and, when comparing its historical volatility, Kg Chemical is 1.01 times less risky than PJ Electronics. The stock trades about -0.08 of its potential returns per unit of risk. The PJ Electronics Co is currently generating about -0.04 of returns per unit of risk over similar time horizon. If you would invest  640,703  in PJ Electronics Co on October 9, 2024 and sell it today you would lose (156,703) from holding PJ Electronics Co or give up 24.46% of portfolio value over 90 days.

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

Kg Chemical  vs.  PJ Electronics Co

Kg Chemical

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Kg Chemical has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Kg Chemical is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

PJ Electronics

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days PJ Electronics Co has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Kg Chemical and PJ Electronics

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

The idea behind Kg Chemical and PJ Electronics 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.

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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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.