Correlation Between Kawan Food and Kossan Rubber

Can any of the company-specific risk be diversified away by investing in both Kawan Food 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 Kawan Food and Kossan Rubber into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Kawan Food Bhd and Kossan Rubber Industries, you can compare the effects of market volatilities on Kawan Food 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 Kawan Food with a short position of Kossan Rubber. Check out your portfolio center. Please also check ongoing floating volatility patterns of Kawan Food and Kossan Rubber.

Diversification Opportunities for Kawan Food and Kossan Rubber

0.69

Correlation Coefficient

Kawan Food  Kossan Rubber

Poor diversification

The 3 months correlation between Kawan and Kossan is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding Kawan Food Bhd 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 Kawan Food 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 Kawan Food Bhd 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 Kawan Food i.e., Kawan Food and Kossan Rubber go up and down completely randomly.

Pair Corralation between Kawan Food and Kossan Rubber

Assuming the 90 days trading horizon Kawan Food Bhd is expected to generate 0.34 times more return on investment than Kossan Rubber. However, Kawan Food Bhd is 2.96 times less risky than Kossan Rubber. It trades about -0.08 of its potential returns per unit of risk. Kossan Rubber Industries is currently generating about -0.13 per unit of risk. If you would invest  167.00  in Kawan Food Bhd on December 1, 2024 and sell it today you would lose (10.00) from holding Kawan Food Bhd or give up 5.99% of portfolio value over 90 days.

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

Kawan Food Bhd  vs.  Kossan Rubber Industries

Kawan Food Bhd

Risk-Adjusted Performance

Very Weak

Over the last 90 days Kawan Food Bhd has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent basic indicators, Kawan Food is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Kossan Rubber Industries

Risk-Adjusted Performance

Very Weak

Over the last 90 days Kossan Rubber Industries has generated negative risk-adjusted returns adding no value to investors with long positions. Despite conflicting performance in the last few months, the Stock's basic indicators remain quite persistent which may send shares a bit higher in April 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Pair Trading with Kawan Food and Kossan Rubber

The main advantage of trading using opposite Kawan Food and Kossan Rubber positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Kawan Food 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 Kawan Food Bhd 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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.