Correlation Between Carlsberg Brewery and Kossan Rubber

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Can any of the company-specific risk be diversified away by investing in both Carlsberg Brewery and Kossan Rubber 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 Carlsberg Brewery and Kossan Rubber into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Carlsberg Brewery Malaysia and Kossan Rubber Industries, you can compare the effects of market volatilities on Carlsberg Brewery and Kossan Rubber 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 Carlsberg Brewery with a short position of Kossan Rubber. Check out your portfolio center. Please also check ongoing floating volatility patterns of Carlsberg Brewery and Kossan Rubber.

Diversification Opportunities for Carlsberg Brewery and Kossan Rubber

0.88
  Correlation Coefficient

Very poor diversification

The 3 months correlation between Carlsberg and Kossan is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding Carlsberg Brewery Malaysia and Kossan Rubber Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kossan Rubber Industries and Carlsberg Brewery 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 Carlsberg Brewery Malaysia are associated (or correlated) with Kossan Rubber. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kossan Rubber Industries has no effect on the direction of Carlsberg Brewery i.e., Carlsberg Brewery and Kossan Rubber go up and down completely randomly.

Pair Corralation between Carlsberg Brewery and Kossan Rubber

Assuming the 90 days trading horizon Carlsberg Brewery is expected to generate 6.9 times less return on investment than Kossan Rubber. But when comparing it to its historical volatility, Carlsberg Brewery Malaysia is 3.42 times less risky than Kossan Rubber. It trades about 0.05 of its potential returns per unit of risk. Kossan Rubber Industries is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  140.00  in Kossan Rubber Industries on October 8, 2024 and sell it today you would earn a total of  138.00  from holding Kossan Rubber Industries or generate 98.57% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthStrong
Accuracy100.0%
ValuesDaily Returns

Carlsberg Brewery Malaysia  vs.  Kossan Rubber Industries

 Performance 
       Timeline  
Carlsberg Brewery 

Risk-Adjusted Performance

10 of 100

 
Weak
 
Strong
OK
Compared to the overall equity markets, risk-adjusted returns on investments in Carlsberg Brewery Malaysia are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting basic indicators, Carlsberg Brewery may actually be approaching a critical reversion point that can send shares even higher in February 2025.
Kossan Rubber Industries 

Risk-Adjusted Performance

21 of 100

 
Weak
 
Strong
Solid
Compared to the overall equity markets, risk-adjusted returns on investments in Kossan Rubber Industries are ranked lower than 21 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting basic indicators, Kossan Rubber disclosed solid returns over the last few months and may actually be approaching a breakup point.

Carlsberg Brewery and Kossan Rubber Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Carlsberg Brewery and Kossan Rubber

The main advantage of trading using opposite Carlsberg Brewery and Kossan Rubber positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Carlsberg Brewery position performs unexpectedly, Kossan Rubber 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 Kossan Rubber will offset losses from the drop in Kossan Rubber's long position.
The idea behind Carlsberg Brewery Malaysia and Kossan Rubber Industries 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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..

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