Correlation Between Double Bond and K Way

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

By analyzing existing cross correlation between Double Bond Chemical and K Way Information, you can compare the effects of market volatilities on Double Bond and K Way 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 Double Bond with a short position of K Way. Check out your portfolio center. Please also check ongoing floating volatility patterns of Double Bond and K Way.

Diversification Opportunities for Double Bond and K Way

0.67

Correlation Coefficient

Double Bond  K Way

Poor diversification

The 3 months correlation between Double and 5201 is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding Double Bond Chemical and K Way Information in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on K Way Information and Double Bond 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 Double Bond Chemical are associated (or correlated) with K Way. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of K Way Information has no effect on the direction of Double Bond i.e., Double Bond and K Way go up and down completely randomly.

Pair Corralation between Double Bond and K Way

Assuming the 90 days trading horizon Double Bond is expected to generate 4.6 times less return on investment than K Way. But when comparing it to its historical volatility, Double Bond Chemical is 2.29 times less risky than K Way. It trades about 0.11 of its potential returns per unit of risk. K Way Information is currently generating about 0.23 of returns per unit of risk over similar time horizon. If you would invest  2,830  in K Way Information on December 22, 2024 and sell it today you would earn a total of  975.00  from holding K Way Information or generate 34.45% return on investment over 90 days.

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

Double Bond Chemical  vs.  K Way Information

Double Bond Chemical

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Double Bond Chemical are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Double Bond may actually be approaching a critical reversion point that can send shares even higher in April 2025.

K Way Information

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in K Way Information are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, K Way showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Double Bond and K Way

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

The idea behind Double Bond Chemical and K Way Information 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.