Correlation Between KPX Green and Humax Holdings

Can any of the company-specific risk be diversified away by investing in both KPX Green and Humax Holdings 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 Humax Holdings 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 Humax Holdings Co, you can compare the effects of market volatilities on KPX Green and Humax Holdings 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 Humax Holdings. Check out your portfolio center. Please also check ongoing floating volatility patterns of KPX Green and Humax Holdings.

Diversification Opportunities for KPX Green and Humax Holdings

0.46

Correlation Coefficient

KPX Green  Humax Holdings

Very weak diversification

The 3 months correlation between KPX and Humax is 0.46. Overlapping area represents the amount of risk that can be diversified away by holding KPX Green Chemical and Humax Holdings Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Humax Holdings 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 Humax Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Humax Holdings has no effect on the direction of KPX Green i.e., KPX Green and Humax Holdings go up and down completely randomly.

Pair Corralation between KPX Green and Humax Holdings

Assuming the 90 days trading horizon KPX Green is expected to generate 1.36 times less return on investment than Humax Holdings. But when comparing it to its historical volatility, KPX Green Chemical is 1.81 times less risky than Humax Holdings. It trades about 0.09 of its potential returns per unit of risk. Humax Holdings Co is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  297,500  in Humax Holdings Co on October 25, 2024 and sell it today you would earn a total of  43,500  from holding Humax Holdings Co or generate 14.62% return on investment over 90 days.

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

KPX Green Chemical  vs.  Humax Holdings Co

KPX Green Chemical

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in KPX Green Chemical are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, KPX Green sustained solid returns over the last few months and may actually be approaching a breakup point.

Humax Holdings

Risk-Adjusted Performance

5 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Humax Holdings Co are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Humax Holdings sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with KPX Green and Humax Holdings

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

The idea behind KPX Green Chemical and Humax Holdings 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.