Correlation Between LegoChem Biosciences and Kukdo Chemical

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

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

Diversification Opportunities for LegoChem Biosciences and Kukdo Chemical

0.04

Correlation Coefficient

LegoChem Biosciences  Kukdo Chemical

Significant diversification

The 3 months correlation between LegoChem and Kukdo is 0.04. Overlapping area represents the amount of risk that can be diversified away by holding LegoChem Biosciences and Kukdo Chemical Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kukdo Chemical and LegoChem Biosciences 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 LegoChem Biosciences 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 LegoChem Biosciences i.e., LegoChem Biosciences and Kukdo Chemical go up and down completely randomly.

Pair Corralation between LegoChem Biosciences and Kukdo Chemical

Assuming the 90 days trading horizon LegoChem Biosciences is expected to generate 25.73 times less return on investment than Kukdo Chemical. In addition to that, LegoChem Biosciences is 1.6 times more volatile than Kukdo Chemical Co. It trades about 0.0 of its total potential returns per unit of risk. Kukdo Chemical Co is currently generating about 0.04 per unit of volatility. If you would invest  2,879,288  in Kukdo Chemical Co on December 24, 2024 and sell it today you would earn a total of  95,712  from holding Kukdo Chemical Co or generate 3.32% return on investment over 90 days.

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

LegoChem Biosciences  vs.  Kukdo Chemical Co

LegoChem Biosciences

Risk-Adjusted Performance

Very Weak

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

Kukdo Chemical

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Kukdo Chemical Co are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. 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 LegoChem Biosciences and Kukdo Chemical

The main advantage of trading using opposite LegoChem Biosciences and Kukdo Chemical positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if LegoChem Biosciences 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 LegoChem Biosciences 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.

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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..