Correlation Between KPX Green and Pyung Hwa

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

Diversification Opportunities for KPX Green and Pyung Hwa

0.8

Correlation Coefficient

KPX Green  Pyung Hwa

Very poor diversification

The 3 months correlation between KPX and Pyung is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding KPX Green Chemical and Pyung Hwa Industrial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pyung Hwa 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 Pyung Hwa. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pyung Hwa Industrial has no effect on the direction of KPX Green i.e., KPX Green and Pyung Hwa go up and down completely randomly.

Pair Corralation between KPX Green and Pyung Hwa

Assuming the 90 days trading horizon KPX Green Chemical is expected to generate 1.55 times more return on investment than Pyung Hwa. However, KPX Green is 1.55 times more volatile than Pyung Hwa Industrial. It trades about -0.03 of its potential returns per unit of risk. Pyung Hwa Industrial is currently generating about -0.07 per unit of risk. If you would invest  769,140  in KPX Green Chemical on September 23, 2024 and sell it today you would lose (129,140) from holding KPX Green Chemical or give up 16.79% of portfolio value over 90 days.

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

KPX Green Chemical  vs.  Pyung Hwa Industrial

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.

Pyung Hwa Industrial

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Pyung Hwa Industrial 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.

Pair Trading with KPX Green and Pyung Hwa

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

The idea behind KPX Green Chemical and Pyung Hwa Industrial 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.