Correlation Between Prime Oil and King Chou

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

By analyzing existing cross correlation between Prime Oil Chemical and King Chou Marine, you can compare the effects of market volatilities on Prime Oil and King Chou 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 Prime Oil with a short position of King Chou. Check out your portfolio center. Please also check ongoing floating volatility patterns of Prime Oil and King Chou.

Diversification Opportunities for Prime Oil and King Chou

-0.47

Correlation Coefficient

Prime Oil  King Chou

Very good diversification

The 3 months correlation between Prime and King is -0.47. Overlapping area represents the amount of risk that can be diversified away by holding Prime Oil Chemical and King Chou Marine in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on King Chou Marine and Prime Oil 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 Prime Oil Chemical are associated (or correlated) with King Chou. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of King Chou Marine has no effect on the direction of Prime Oil i.e., Prime Oil and King Chou go up and down completely randomly.

Pair Corralation between Prime Oil and King Chou

Assuming the 90 days trading horizon Prime Oil Chemical is expected to under-perform the King Chou. But the stock apears to be less risky and, when comparing its historical volatility, Prime Oil Chemical is 3.22 times less risky than King Chou. The stock trades about -0.27 of its potential returns per unit of risk. The King Chou Marine is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  4,025  in King Chou Marine on October 8, 2024 and sell it today you would earn a total of  20.00  from holding King Chou Marine or generate 0.5% return on investment over 90 days.

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

Prime Oil Chemical  vs.  King Chou Marine

Prime Oil Chemical

Risk-Adjusted Performance

0 of 100

Very Weak

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

King Chou Marine

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days King Chou Marine has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, King Chou 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 Prime Oil and King Chou

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

The idea behind Prime Oil Chemical and King Chou Marine 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.

Check out your portfolio center.

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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.