Correlation Between Kg Chemical and ABOV Semiconductor

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

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

Diversification Opportunities for Kg Chemical and ABOV Semiconductor

0.63

Correlation Coefficient

Kg Chemical  ABOV Semiconductor

Poor diversification

The 3 months correlation between 001390 and ABOV is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding Kg Chemical and ABOV Semiconductor Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ABOV Semiconductor 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 ABOV Semiconductor. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ABOV Semiconductor has no effect on the direction of Kg Chemical i.e., Kg Chemical and ABOV Semiconductor go up and down completely randomly.

Pair Corralation between Kg Chemical and ABOV Semiconductor

Assuming the 90 days trading horizon Kg Chemical is expected to generate 12.79 times less return on investment than ABOV Semiconductor. But when comparing it to its historical volatility, Kg Chemical is 3.6 times less risky than ABOV Semiconductor. It trades about 0.05 of its potential returns per unit of risk. ABOV Semiconductor Co is currently generating about 0.18 of returns per unit of risk over similar time horizon. If you would invest  775,551  in ABOV Semiconductor Co on December 23, 2024 and sell it today you would earn a total of  502,449  from holding ABOV Semiconductor Co or generate 64.79% return on investment over 90 days.

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

Kg Chemical  vs.  ABOV Semiconductor Co

Kg Chemical

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Kg Chemical are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. 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.

ABOV Semiconductor

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in ABOV Semiconductor Co are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, ABOV Semiconductor sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Kg Chemical and ABOV Semiconductor

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

The idea behind Kg Chemical and ABOV Semiconductor 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.