Correlation Between KRAKATAU STEEL and Sanyo Chemical

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

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

Diversification Opportunities for KRAKATAU STEEL and Sanyo Chemical

0.59

Correlation Coefficient

KRAKATAU STEEL  Sanyo Chemical

Very weak diversification

The 3 months correlation between KRAKATAU and Sanyo is 0.59. Overlapping area represents the amount of risk that can be diversified away by holding KRAKATAU STEEL B and Sanyo Chemical Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sanyo Chemical Industries and KRAKATAU STEEL 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 KRAKATAU STEEL B are associated (or correlated) with Sanyo Chemical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sanyo Chemical Industries has no effect on the direction of KRAKATAU STEEL i.e., KRAKATAU STEEL and Sanyo Chemical go up and down completely randomly.

Pair Corralation between KRAKATAU STEEL and Sanyo Chemical

Assuming the 90 days trading horizon KRAKATAU STEEL B is expected to generate 1.81 times more return on investment than Sanyo Chemical. However, KRAKATAU STEEL is 1.81 times more volatile than Sanyo Chemical Industries. It trades about 0.08 of its potential returns per unit of risk. Sanyo Chemical Industries is currently generating about 0.03 per unit of risk. If you would invest  0.85  in KRAKATAU STEEL B on December 29, 2024 and sell it today you would earn a total of  0.10  from holding KRAKATAU STEEL B or generate 11.76% return on investment over 90 days.

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

KRAKATAU STEEL B   vs.  Sanyo Chemical Industries

KRAKATAU STEEL B

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in KRAKATAU STEEL B are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile forward-looking signals, KRAKATAU STEEL unveiled solid returns over the last few months and may actually be approaching a breakup point.

Sanyo Chemical Industries

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Sanyo Chemical Industries are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Sanyo Chemical is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with KRAKATAU STEEL and Sanyo Chemical

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

The idea behind KRAKATAU STEEL B and Sanyo Chemical Industries 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.