Correlation Between KINGBOARD CHEMICAL and GVS SPA

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

By analyzing existing cross correlation between KINGBOARD CHEMICAL and GVS SPA, you can compare the effects of market volatilities on KINGBOARD CHEMICAL and GVS SPA 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 GVS SPA. Check out your portfolio center. Please also check ongoing floating volatility patterns of KINGBOARD CHEMICAL and GVS SPA.

Diversification Opportunities for KINGBOARD CHEMICAL and GVS SPA

-0.23

Correlation Coefficient

KINGBOARD CHEMICAL  GVS SPA

Very good diversification

The 3 months correlation between KINGBOARD and GVS is -0.23. Overlapping area represents the amount of risk that can be diversified away by holding KINGBOARD CHEMICAL and GVS SPA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GVS SPA 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 are associated (or correlated) with GVS SPA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GVS SPA has no effect on the direction of KINGBOARD CHEMICAL i.e., KINGBOARD CHEMICAL and GVS SPA go up and down completely randomly.

Pair Corralation between KINGBOARD CHEMICAL and GVS SPA

Assuming the 90 days trading horizon KINGBOARD CHEMICAL is expected to generate 1.28 times more return on investment than GVS SPA. However, KINGBOARD CHEMICAL is 1.28 times more volatile than GVS SPA. It trades about 0.05 of its potential returns per unit of risk. GVS SPA is currently generating about 0.01 per unit of risk. If you would invest  151.00  in KINGBOARD CHEMICAL on September 15, 2024 and sell it today you would earn a total of  47.00  from holding KINGBOARD CHEMICAL or generate 31.13% return on investment over 90 days.

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

KINGBOARD CHEMICAL  vs.  GVS SPA

KINGBOARD CHEMICAL

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in KINGBOARD CHEMICAL are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain basic indicators, KINGBOARD CHEMICAL exhibited solid returns over the last few months and may actually be approaching a breakup point.

GVS SPA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days GVS SPA has generated negative risk-adjusted returns adding no value to investors with long positions. Despite uncertain performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with KINGBOARD CHEMICAL and GVS SPA

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

The idea behind KINGBOARD CHEMICAL and GVS SPA 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.