Correlation Between Kingboard Chemical and BANCO

Can any of the company-specific risk be diversified away by investing in both Kingboard Chemical and BANCO 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 BANCO 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 BANCO SANTANDER S, you can compare the effects of market volatilities on Kingboard Chemical and BANCO 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 BANCO. Check out your portfolio center. Please also check ongoing floating volatility patterns of Kingboard Chemical and BANCO.

Diversification Opportunities for Kingboard Chemical and BANCO

0.07

Correlation Coefficient

Kingboard Chemical  BANCO

Significant diversification

The 3 months correlation between Kingboard and BANCO is 0.07. Overlapping area represents the amount of risk that can be diversified away by holding Kingboard Chemical Holdings and BANCO SANTANDER S in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BANCO SANTANDER S 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 BANCO. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BANCO SANTANDER S has no effect on the direction of Kingboard Chemical i.e., Kingboard Chemical and BANCO go up and down completely randomly.

Pair Corralation between Kingboard Chemical and BANCO

Assuming the 90 days horizon Kingboard Chemical Holdings is expected to generate 3.32 times more return on investment than BANCO. However, Kingboard Chemical is 3.32 times more volatile than BANCO SANTANDER S. It trades about 0.13 of its potential returns per unit of risk. BANCO SANTANDER S is currently generating about 0.01 per unit of risk. If you would invest  1,165  in Kingboard Chemical Holdings on December 24, 2024 and sell it today you would earn a total of  172.00  from holding Kingboard Chemical Holdings or generate 14.76% return on investment over 90 days.

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

Kingboard Chemical Holdings  vs.  BANCO SANTANDER S

Kingboard Chemical

Risk-Adjusted Performance

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 conflicting fundamental indicators, Kingboard Chemical showed solid returns over the last few months and may actually be approaching a breakup point.

BANCO SANTANDER S

Risk-Adjusted Performance

Very Weak

Over the last 90 days BANCO SANTANDER S has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, BANCO is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Kingboard Chemical and BANCO

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

The idea behind Kingboard Chemical Holdings and BANCO SANTANDER S 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.

Check out your portfolio center.

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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.