Correlation Between Kukdo Chemical and SKC

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

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

Diversification Opportunities for Kukdo Chemical and SKC

-0.07

Correlation Coefficient

Kukdo Chemical  SKC

Good diversification

The 3 months correlation between Kukdo and SKC is -0.07. Overlapping area represents the amount of risk that can be diversified away by holding Kukdo Chemical Co and SKC Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SKC Co and Kukdo 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 Kukdo Chemical Co are associated (or correlated) with SKC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SKC Co has no effect on the direction of Kukdo Chemical i.e., Kukdo Chemical and SKC go up and down completely randomly.

Pair Corralation between Kukdo Chemical and SKC

Assuming the 90 days trading horizon Kukdo Chemical is expected to generate 10.13 times less return on investment than SKC. But when comparing it to its historical volatility, Kukdo Chemical Co is 2.32 times less risky than SKC. It trades about 0.01 of its potential returns per unit of risk. SKC Co is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  10,510,000  in SKC Co on December 30, 2024 and sell it today you would earn a total of  490,000  from holding SKC Co or generate 4.66% return on investment over 90 days.

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

Kukdo Chemical Co  vs.  SKC Co

Kukdo Chemical

Risk-Adjusted Performance

Very Weak

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

SKC Co

Risk-Adjusted Performance

Insignificant

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

Pair Trading with Kukdo Chemical and SKC

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

The idea behind Kukdo Chemical Co and SKC 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.