Correlation Between Shiny Chemical and Kingstate Electronics

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

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

Diversification Opportunities for Shiny Chemical and Kingstate Electronics

-0.45

Correlation Coefficient

Shiny Chemical  Kingstate Electronics

Very good diversification

The 3 months correlation between Shiny and Kingstate is -0.45. Overlapping area represents the amount of risk that can be diversified away by holding Shiny Chemical Industrial and Kingstate Electronics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kingstate Electronics and Shiny Chemical 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 Shiny Chemical Industrial are associated (or correlated) with Kingstate Electronics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kingstate Electronics has no effect on the direction of Shiny Chemical i.e., Shiny Chemical and Kingstate Electronics go up and down completely randomly.

Pair Corralation between Shiny Chemical and Kingstate Electronics

Assuming the 90 days trading horizon Shiny Chemical Industrial is expected to under-perform the Kingstate Electronics. In addition to that, Shiny Chemical is 2.14 times more volatile than Kingstate Electronics. It trades about -0.06 of its total potential returns per unit of risk. Kingstate Electronics is currently generating about 0.1 per unit of volatility. If you would invest  4,180  in Kingstate Electronics on December 23, 2024 and sell it today you would earn a total of  180.00  from holding Kingstate Electronics or generate 4.31% return on investment over 90 days.

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

Shiny Chemical Industrial  vs.  Kingstate Electronics

Shiny Chemical Industrial

Risk-Adjusted Performance

Very Weak

Over the last 90 days Shiny Chemical Industrial has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Shiny Chemical is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Kingstate Electronics

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Kingstate Electronics are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, Kingstate Electronics is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with Shiny Chemical and Kingstate Electronics

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

The idea behind Shiny Chemical Industrial and Kingstate Electronics 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 Portfolio File Import module to quickly import all of your third-party portfolios from your local drive in csv format.