Correlation Between American Public and KINGBOARD CHEMICAL

Can any of the company-specific risk be diversified away by investing in both American Public and KINGBOARD CHEMICAL 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 American Public and KINGBOARD CHEMICAL into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between American Public Education and KINGBOARD CHEMICAL, you can compare the effects of market volatilities on American Public and KINGBOARD CHEMICAL 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 American Public with a short position of KINGBOARD CHEMICAL. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Public and KINGBOARD CHEMICAL.

Diversification Opportunities for American Public and KINGBOARD CHEMICAL

0.46

Correlation Coefficient

American Public  KINGBOARD CHEMICAL

Very weak diversification

The 3 months correlation between American and KINGBOARD is 0.46. Overlapping area represents the amount of risk that can be diversified away by holding American Public Education and KINGBOARD CHEMICAL in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on KINGBOARD CHEMICAL and American Public 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 American Public Education are associated (or correlated) with KINGBOARD CHEMICAL. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of KINGBOARD CHEMICAL has no effect on the direction of American Public i.e., American Public and KINGBOARD CHEMICAL go up and down completely randomly.

Pair Corralation between American Public and KINGBOARD CHEMICAL

Assuming the 90 days horizon American Public is expected to generate 4.88 times less return on investment than KINGBOARD CHEMICAL. But when comparing it to its historical volatility, American Public Education is 2.21 times less risky than KINGBOARD CHEMICAL. It trades about 0.11 of its potential returns per unit of risk. KINGBOARD CHEMICAL is currently generating about 0.24 of returns per unit of risk over similar time horizon. If you would invest  191.00  in KINGBOARD CHEMICAL on October 5, 2024 and sell it today you would earn a total of  41.00  from holding KINGBOARD CHEMICAL or generate 21.47% return on investment over 90 days.

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

American Public Education  vs.  KINGBOARD CHEMICAL

American Public Education

Risk-Adjusted Performance

0 of 100

Solid

Over the last 90 days American Public Education has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly fragile basic indicators, American Public reported solid returns over the last few months and may actually be approaching a breakup point.

KINGBOARD CHEMICAL

Risk-Adjusted Performance

0 of 100

Modest

Over the last 90 days KINGBOARD CHEMICAL has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather uncertain basic indicators, KINGBOARD CHEMICAL may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with American Public and KINGBOARD CHEMICAL

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

The idea behind American Public Education and KINGBOARD CHEMICAL 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.