Correlation Between KG Eco and RPBio

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

By analyzing existing cross correlation between KG Eco Technology and RPBio Inc, you can compare the effects of market volatilities on KG Eco and RPBio 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 KG Eco with a short position of RPBio. Check out your portfolio center. Please also check ongoing floating volatility patterns of KG Eco and RPBio.

Diversification Opportunities for KG Eco and RPBio

-0.14

Correlation Coefficient

KG Eco  RPBio

Good diversification

The 3 months correlation between 151860 and RPBio is -0.14. Overlapping area represents the amount of risk that can be diversified away by holding KG Eco Technology and RPBio Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on RPBio Inc and KG Eco 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 KG Eco Technology are associated (or correlated) with RPBio. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of RPBio Inc has no effect on the direction of KG Eco i.e., KG Eco and RPBio go up and down completely randomly.

Pair Corralation between KG Eco and RPBio

Assuming the 90 days trading horizon KG Eco is expected to generate 2.21 times less return on investment than RPBio. But when comparing it to its historical volatility, KG Eco Technology is 1.31 times less risky than RPBio. It trades about 0.05 of its potential returns per unit of risk. RPBio Inc is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  521,000  in RPBio Inc on December 23, 2024 and sell it today you would earn a total of  59,000  from holding RPBio Inc or generate 11.32% return on investment over 90 days.

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

KG Eco Technology  vs.  RPBio Inc

KG Eco Technology

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in KG Eco Technology are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, KG Eco is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

RPBio Inc

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in RPBio Inc are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, RPBio sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with KG Eco and RPBio

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

The idea behind KG Eco Technology and RPBio Inc 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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.