Correlation Between KPX Green and Songwon Industrial

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

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

Diversification Opportunities for KPX Green and Songwon Industrial

0.53

Correlation Coefficient

KPX Green  Songwon Industrial

Very weak diversification

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

Pair Corralation between KPX Green and Songwon Industrial

Assuming the 90 days trading horizon KPX Green Chemical is expected to under-perform the Songwon Industrial. In addition to that, KPX Green is 1.12 times more volatile than Songwon Industrial Co. It trades about -0.03 of its total potential returns per unit of risk. Songwon Industrial Co is currently generating about -0.02 per unit of volatility. 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

KPX Green Chemical  vs.  Songwon Industrial Co

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.

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.

Pair Trading with KPX Green and Songwon Industrial

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

The idea behind KPX Green Chemical and Songwon Industrial 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 Commodity Directory module to find actively traded commodities issued by global exchanges.