Correlation Between Songwon Industrial and KPX Green

Can any of the company-specific risk be diversified away by investing in both Songwon Industrial and KPX Green 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 Songwon Industrial and KPX Green into the same portfolio, which is an essential part of the fundamental portfolio management process.

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

Diversification Opportunities for Songwon Industrial and KPX Green

0.53

Correlation Coefficient

Songwon Industrial  KPX Green

Very weak diversification

The 3 months correlation between Songwon and KPX is 0.53. Overlapping area represents the amount of risk that can be diversified away by holding Songwon Industrial Co and KPX Green Chemical in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on KPX Green Chemical and Songwon Industrial 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 Songwon Industrial Co are associated (or correlated) with KPX Green. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of KPX Green Chemical has no effect on the direction of Songwon Industrial i.e., Songwon Industrial and KPX Green go up and down completely randomly.

Pair Corralation between Songwon Industrial and KPX Green

Assuming the 90 days trading horizon Songwon Industrial Co is expected to generate 0.89 times more return on investment than KPX Green. However, Songwon Industrial Co is 1.12 times less risky than KPX Green. It trades about -0.02 of its potential returns per unit of risk. KPX Green Chemical is currently generating about -0.03 per unit of risk. If you would invest  1,234,000  in Songwon Industrial Co on September 23, 2024 and sell it today you would lose (152,000) from holding Songwon Industrial Co or give up 12.32% of portfolio value over 90 days.

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

Songwon Industrial Co  vs.  KPX Green Chemical

Songwon Industrial

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Songwon Industrial Co are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Songwon Industrial may actually be approaching a critical reversion point that can send shares even higher in January 2025.

KPX Green Chemical

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in KPX Green Chemical are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, KPX Green is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Songwon Industrial and KPX Green

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

The idea behind Songwon Industrial Co and KPX Green Chemical 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.