Correlation Between KPX Green and Daol Investment

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

Diversification Opportunities for KPX Green and Daol Investment

0.77

Correlation Coefficient

KPX Green  Daol Investment

Poor diversification

The 3 months correlation between KPX and Daol is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding KPX Green Chemical and Daol Investment Securities in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Daol Investment Secu 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 Daol Investment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Daol Investment Secu has no effect on the direction of KPX Green i.e., KPX Green and Daol Investment go up and down completely randomly.

Pair Corralation between KPX Green and Daol Investment

Assuming the 90 days trading horizon KPX Green is expected to generate 2.19 times less return on investment than Daol Investment. In addition to that, KPX Green is 1.09 times more volatile than Daol Investment Securities. It trades about 0.0 of its total potential returns per unit of risk. Daol Investment Securities is currently generating about 0.01 per unit of volatility. If you would invest  329,499  in Daol Investment Securities on October 23, 2024 and sell it today you would lose (36,999) from holding Daol Investment Securities or give up 11.23% of portfolio value over 90 days.

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

KPX Green Chemical  vs.  Daol Investment Securities

KPX Green Chemical

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in KPX Green Chemical are ranked lower than 9 (%) 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.

Daol Investment Secu

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Daol Investment Securities are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Daol Investment is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with KPX Green and Daol Investment

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

The idea behind KPX Green Chemical and Daol Investment Securities 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.

Check out your portfolio center.

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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.