Correlation Between Kingboard Chemical and Luxfer Holdings

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

By analyzing existing cross correlation between Kingboard Chemical Holdings and Luxfer Holdings PLC, you can compare the effects of market volatilities on Kingboard Chemical and Luxfer Holdings 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 Kingboard Chemical with a short position of Luxfer Holdings. Check out your portfolio center. Please also check ongoing floating volatility patterns of Kingboard Chemical and Luxfer Holdings.

Diversification Opportunities for Kingboard Chemical and Luxfer Holdings

-0.35

Correlation Coefficient

Kingboard Chemical  Luxfer Holdings

Very good diversification

The 3 months correlation between Kingboard and Luxfer is -0.35. Overlapping area represents the amount of risk that can be diversified away by holding Kingboard Chemical Holdings and Luxfer Holdings PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Luxfer Holdings PLC and Kingboard Chemical 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 Kingboard Chemical Holdings are associated (or correlated) with Luxfer Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Luxfer Holdings PLC has no effect on the direction of Kingboard Chemical i.e., Kingboard Chemical and Luxfer Holdings go up and down completely randomly.

Pair Corralation between Kingboard Chemical and Luxfer Holdings

Assuming the 90 days horizon Kingboard Chemical Holdings is expected to generate 0.2 times more return on investment than Luxfer Holdings. However, Kingboard Chemical Holdings is 5.06 times less risky than Luxfer Holdings. It trades about 0.16 of its potential returns per unit of risk. Luxfer Holdings PLC is currently generating about -0.22 per unit of risk. If you would invest  1,139  in Kingboard Chemical Holdings on October 11, 2024 and sell it today you would earn a total of  26.00  from holding Kingboard Chemical Holdings or generate 2.28% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	97.56%
Values	Daily Returns

Kingboard Chemical Holdings  vs.  Luxfer Holdings PLC

Kingboard Chemical

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Kingboard Chemical Holdings are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong fundamental indicators, Kingboard Chemical is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.

Luxfer Holdings PLC

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Luxfer Holdings PLC has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable technical and fundamental indicators, Luxfer Holdings is not utilizing all of its potentials. The recent stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Kingboard Chemical and Luxfer Holdings

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

The idea behind Kingboard Chemical Holdings and Luxfer Holdings PLC 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.