Correlation Between HKFoods Oyj and Kempower Oyj

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

By analyzing existing cross correlation between HKFoods Oyj A and Kempower Oyj, you can compare the effects of market volatilities on HKFoods Oyj and Kempower Oyj 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 HKFoods Oyj with a short position of Kempower Oyj. Check out your portfolio center. Please also check ongoing floating volatility patterns of HKFoods Oyj and Kempower Oyj.

Diversification Opportunities for HKFoods Oyj and Kempower Oyj

0.74

Correlation Coefficient

HKFoods Oyj  Kempower Oyj

Poor diversification

The 3 months correlation between HKFoods and Kempower is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding HKFoods Oyj A and Kempower Oyj in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kempower Oyj and HKFoods Oyj 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 HKFoods Oyj A are associated (or correlated) with Kempower Oyj. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kempower Oyj has no effect on the direction of HKFoods Oyj i.e., HKFoods Oyj and Kempower Oyj go up and down completely randomly.

Pair Corralation between HKFoods Oyj and Kempower Oyj

Assuming the 90 days trading horizon HKFoods Oyj is expected to generate 1.97 times less return on investment than Kempower Oyj. But when comparing it to its historical volatility, HKFoods Oyj A is 1.34 times less risky than Kempower Oyj. It trades about 0.13 of its potential returns per unit of risk. Kempower Oyj is currently generating about 0.2 of returns per unit of risk over similar time horizon. If you would invest  921.00  in Kempower Oyj on December 3, 2024 and sell it today you would earn a total of  449.00  from holding Kempower Oyj or generate 48.75% return on investment over 90 days.

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

HKFoods Oyj A  vs.  Kempower Oyj

HKFoods Oyj A

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in HKFoods Oyj A are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak basic indicators, HKFoods Oyj unveiled solid returns over the last few months and may actually be approaching a breakup point.

Kempower Oyj

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Kempower Oyj are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, Kempower Oyj reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with HKFoods Oyj and Kempower Oyj

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

The idea behind HKFoods Oyj A and Kempower Oyj 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.