Correlation Between Kingsmen CMTI and Sea Oil

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

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

Diversification Opportunities for Kingsmen CMTI and Sea Oil

0.36

Correlation Coefficient

Kingsmen CMTI  Sea Oil

Weak diversification

The 3 months correlation between Kingsmen and Sea is 0.36. Overlapping area represents the amount of risk that can be diversified away by holding Kingsmen CMTI Public and Sea Oil Public in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sea Oil Public and Kingsmen CMTI 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 Kingsmen CMTI Public are associated (or correlated) with Sea Oil. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sea Oil Public has no effect on the direction of Kingsmen CMTI i.e., Kingsmen CMTI and Sea Oil go up and down completely randomly.

Pair Corralation between Kingsmen CMTI and Sea Oil

Given the investment horizon of 90 days Kingsmen CMTI Public is expected to generate 81.25 times more return on investment than Sea Oil. However, Kingsmen CMTI is 81.25 times more volatile than Sea Oil Public. It trades about 0.13 of its potential returns per unit of risk. Sea Oil Public is currently generating about 0.05 per unit of risk. If you would invest  0.00  in Kingsmen CMTI Public on September 3, 2024 and sell it today you would earn a total of  126.00  from holding Kingsmen CMTI Public or generate 9.223372036854776E16% return on investment over 90 days.

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

Kingsmen CMTI Public  vs.  Sea Oil Public

Kingsmen CMTI Public

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Kingsmen CMTI Public are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting fundamental drivers, Kingsmen CMTI disclosed solid returns over the last few months and may actually be approaching a breakup point.

Sea Oil Public

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Sea Oil Public are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Sea Oil is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Kingsmen CMTI and Sea Oil

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

The idea behind Kingsmen CMTI Public and Sea Oil Public 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.