Correlation Between Kbi Metal and Choil Aluminum

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

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

Diversification Opportunities for Kbi Metal and Choil Aluminum

0.64

Correlation Coefficient

Kbi Metal  Choil Aluminum

Poor diversification

The 3 months correlation between Kbi and Choil is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding Kbi Metal Co and Choil Aluminum in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Choil Aluminum and Kbi Metal 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 Kbi Metal Co are associated (or correlated) with Choil Aluminum. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Choil Aluminum has no effect on the direction of Kbi Metal i.e., Kbi Metal and Choil Aluminum go up and down completely randomly.

Pair Corralation between Kbi Metal and Choil Aluminum

Assuming the 90 days trading horizon Kbi Metal is expected to generate 6.76 times less return on investment than Choil Aluminum. In addition to that, Kbi Metal is 1.71 times more volatile than Choil Aluminum. It trades about 0.01 of its total potential returns per unit of risk. Choil Aluminum is currently generating about 0.08 per unit of volatility. If you would invest  146,300  in Choil Aluminum on December 4, 2024 and sell it today you would earn a total of  13,300  from holding Choil Aluminum or generate 9.09% return on investment over 90 days.

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

Kbi Metal Co  vs.  Choil Aluminum

Kbi Metal

Risk-Adjusted Performance

Very Weak

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

Choil Aluminum

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Choil Aluminum are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Choil Aluminum may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Kbi Metal and Choil Aluminum

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

The idea behind Kbi Metal Co and Choil Aluminum 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 Commodity Directory module to find actively traded commodities issued by global exchanges.