Correlation Between BIT Computer and Kumho Petro

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

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

Diversification Opportunities for BIT Computer and Kumho Petro

0.6

Correlation Coefficient

BIT Computer  Kumho Petro

Poor diversification

The 3 months correlation between BIT and Kumho is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding BIT Computer Co and Kumho Petro Chemical in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kumho Petro Chemical and BIT Computer 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 BIT Computer Co are associated (or correlated) with Kumho Petro. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kumho Petro Chemical has no effect on the direction of BIT Computer i.e., BIT Computer and Kumho Petro go up and down completely randomly.

Pair Corralation between BIT Computer and Kumho Petro

Assuming the 90 days trading horizon BIT Computer Co is expected to generate 0.96 times more return on investment than Kumho Petro. However, BIT Computer Co is 1.05 times less risky than Kumho Petro. It trades about -0.08 of its potential returns per unit of risk. Kumho Petro Chemical is currently generating about -0.17 per unit of risk. If you would invest  518,000  in BIT Computer Co on September 12, 2024 and sell it today you would lose (48,500) from holding BIT Computer Co or give up 9.36% of portfolio value over 90 days.

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

BIT Computer Co  vs.  Kumho Petro Chemical

BIT Computer

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days BIT Computer Co has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Kumho Petro Chemical

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Kumho Petro Chemical has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with BIT Computer and Kumho Petro

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

The idea behind BIT Computer Co and Kumho Petro 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.