Correlation Between Green Cross and KPX Green

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

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

Diversification Opportunities for Green Cross and KPX Green

0.44

Correlation Coefficient

Green Cross  KPX Green

Very weak diversification

The 3 months correlation between Green and KPX is 0.44. Overlapping area represents the amount of risk that can be diversified away by holding Green Cross Medical and KPX Green Chemical in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on KPX Green Chemical and Green Cross 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 Green Cross Medical are associated (or correlated) with KPX Green. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of KPX Green Chemical has no effect on the direction of Green Cross i.e., Green Cross and KPX Green go up and down completely randomly.

Pair Corralation between Green Cross and KPX Green

Assuming the 90 days trading horizon Green Cross is expected to generate 1.82 times less return on investment than KPX Green. But when comparing it to its historical volatility, Green Cross Medical is 1.49 times less risky than KPX Green. It trades about 0.43 of its potential returns per unit of risk. KPX Green Chemical is currently generating about 0.53 of returns per unit of risk over similar time horizon. If you would invest  417,843  in KPX Green Chemical on October 8, 2024 and sell it today you would earn a total of  278,157  from holding KPX Green Chemical or generate 66.57% return on investment over 90 days.

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

Green Cross Medical  vs.  KPX Green Chemical

Green Cross Medical

Risk-Adjusted Performance

2 of 100

Very Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Green Cross Medical are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Green Cross is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

KPX Green Chemical

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in KPX Green Chemical are ranked lower than 5 (%) 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.

Pair Trading with Green Cross and KPX Green

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

The idea behind Green Cross Medical and KPX Green Chemical 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.