Correlation Between Formetal and Kukdo Chemical

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

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

Diversification Opportunities for Formetal and Kukdo Chemical

-0.07

Correlation Coefficient

Formetal  Kukdo Chemical

Good diversification

The 3 months correlation between Formetal and Kukdo is -0.07. Overlapping area represents the amount of risk that can be diversified away by holding Formetal Co and Kukdo Chemical Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kukdo Chemical and Formetal 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 Formetal Co are associated (or correlated) with Kukdo Chemical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kukdo Chemical has no effect on the direction of Formetal i.e., Formetal and Kukdo Chemical go up and down completely randomly.

Pair Corralation between Formetal and Kukdo Chemical

Assuming the 90 days trading horizon Formetal Co is expected to generate 1.96 times more return on investment than Kukdo Chemical. However, Formetal is 1.96 times more volatile than Kukdo Chemical Co. It trades about 0.12 of its potential returns per unit of risk. Kukdo Chemical Co is currently generating about 0.0 per unit of risk. If you would invest  275,417  in Formetal Co on October 9, 2024 and sell it today you would earn a total of  78,083  from holding Formetal Co or generate 28.35% return on investment over 90 days.

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

Formetal Co  vs.  Kukdo Chemical Co

Formetal

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Formetal Co are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Formetal sustained solid returns over the last few months and may actually be approaching a breakup point.

Kukdo Chemical

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Kukdo Chemical Co has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Kukdo Chemical is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Formetal and Kukdo Chemical

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

The idea behind Formetal Co and Kukdo Chemical 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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.