Correlation Between Keyence and ChemoMetec

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

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

Diversification Opportunities for Keyence and ChemoMetec

-0.24

Correlation Coefficient

Keyence  ChemoMetec

Very good diversification

The 3 months correlation between Keyence and ChemoMetec is -0.24. Overlapping area represents the amount of risk that can be diversified away by holding Keyence and ChemoMetec AS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ChemoMetec AS and Keyence 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 Keyence are associated (or correlated) with ChemoMetec. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ChemoMetec AS has no effect on the direction of Keyence i.e., Keyence and ChemoMetec go up and down completely randomly.

Pair Corralation between Keyence and ChemoMetec

Assuming the 90 days horizon Keyence is expected to under-perform the ChemoMetec. But the stock apears to be less risky and, when comparing its historical volatility, Keyence is 3.38 times less risky than ChemoMetec. The stock trades about -0.05 of its potential returns per unit of risk. The ChemoMetec AS is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest  4,596  in ChemoMetec AS on October 8, 2024 and sell it today you would earn a total of  1,984  from holding ChemoMetec AS or generate 43.17% return on investment over 90 days.

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

Keyence  vs.  ChemoMetec AS

Keyence

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Keyence has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Keyence is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

ChemoMetec AS

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in ChemoMetec AS are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, ChemoMetec reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Keyence and ChemoMetec

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

The idea behind Keyence and ChemoMetec AS 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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.