Correlation Between Kenda Rubber and Eurocharm Holdings

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

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

Diversification Opportunities for Kenda Rubber and Eurocharm Holdings

-0.59

Correlation Coefficient

Kenda Rubber  Eurocharm Holdings

Excellent diversification

The 3 months correlation between Kenda and Eurocharm is -0.59. Overlapping area represents the amount of risk that can be diversified away by holding Kenda Rubber Industrial and Eurocharm Holdings Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Eurocharm Holdings and Kenda Rubber 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 Kenda Rubber Industrial are associated (or correlated) with Eurocharm Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Eurocharm Holdings has no effect on the direction of Kenda Rubber i.e., Kenda Rubber and Eurocharm Holdings go up and down completely randomly.

Pair Corralation between Kenda Rubber and Eurocharm Holdings

Assuming the 90 days trading horizon Kenda Rubber Industrial is expected to generate 0.95 times more return on investment than Eurocharm Holdings. However, Kenda Rubber Industrial is 1.05 times less risky than Eurocharm Holdings. It trades about 0.3 of its potential returns per unit of risk. Eurocharm Holdings Co is currently generating about -0.31 per unit of risk. If you would invest  2,645  in Kenda Rubber Industrial on December 4, 2024 and sell it today you would earn a total of  160.00  from holding Kenda Rubber Industrial or generate 6.05% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	95.24%
Values	Daily Returns

Kenda Rubber Industrial  vs.  Eurocharm Holdings Co

Kenda Rubber Industrial

Risk-Adjusted Performance

Very Weak

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

Eurocharm Holdings

Risk-Adjusted Performance

Very Weak

Over the last 90 days Eurocharm Holdings Co has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Eurocharm Holdings 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 Kenda Rubber and Eurocharm Holdings

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

The idea behind Kenda Rubber Industrial and Eurocharm Holdings 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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.