Correlation Between Kg Chemical and KG Eco

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

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

Diversification Opportunities for Kg Chemical and KG Eco

0.95

Correlation Coefficient

Kg Chemical  KG Eco

Almost no diversification

The 3 months correlation between 001390 and 151860 is 0.95. Overlapping area represents the amount of risk that can be diversified away by holding Kg Chemical and KG Eco Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on KG Eco Technology 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 KG Eco. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of KG Eco Technology has no effect on the direction of Kg Chemical i.e., Kg Chemical and KG Eco go up and down completely randomly.

Pair Corralation between Kg Chemical and KG Eco

Assuming the 90 days trading horizon Kg Chemical is expected to generate 0.83 times more return on investment than KG Eco. However, Kg Chemical is 1.21 times less risky than KG Eco. It trades about -0.06 of its potential returns per unit of risk. KG Eco Technology is currently generating about -0.09 per unit of risk. If you would invest  519,619  in Kg Chemical on October 9, 2024 and sell it today you would lose (135,119) from holding Kg Chemical or give up 26.0% of portfolio value over 90 days.

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

Kg Chemical  vs.  KG Eco Technology

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.

KG Eco Technology

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Kg Chemical and KG Eco

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

The idea behind Kg Chemical and KG Eco Technology 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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.