Correlation Between Kinko Optical and Oriental Union

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

Diversification Opportunities for Kinko Optical and Oriental Union

0.67
  Correlation Coefficient

Poor diversification

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

Pair Corralation between Kinko Optical and Oriental Union

Assuming the 90 days trading horizon Kinko Optical Co is expected to generate 1.05 times more return on investment than Oriental Union. However, Kinko Optical is 1.05 times more volatile than Oriental Union Chemical. It trades about 0.02 of its potential returns per unit of risk. Oriental Union Chemical is currently generating about -0.14 per unit of risk. If you would invest  2,500  in Kinko Optical Co on September 5, 2024 and sell it today you would earn a total of  20.00  from holding Kinko Optical Co or generate 0.8% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy100.0%
ValuesDaily Returns

Kinko Optical Co  vs.  Oriental Union Chemical

 Performance 
       Timeline  
Kinko Optical 

Risk-Adjusted Performance

1 of 100

 
Weak
 
Strong
Very Weak
Compared to the overall equity markets, risk-adjusted returns on investments in Kinko Optical Co are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, Kinko Optical is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.
Oriental Union Chemical 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Oriental Union Chemical has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest abnormal performance, the Stock's basic indicators remain stable and the latest fuss on Wall Street may also be a sign of long-term gains for the venture sophisticated investors.

Kinko Optical and Oriental Union Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Kinko Optical and Oriental Union

The main advantage of trading using opposite Kinko Optical and Oriental Union positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Kinko Optical position performs unexpectedly, Oriental Union 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 Oriental Union will offset losses from the drop in Oriental Union's long position.
The idea behind Kinko Optical Co and Oriental Union 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.

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