Correlation Between KINGBOARD CHEMICAL and InPlay Oil

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

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

Diversification Opportunities for KINGBOARD CHEMICAL and InPlay Oil

-0.46

Correlation Coefficient

KINGBOARD CHEMICAL  InPlay Oil

Very good diversification

The 3 months correlation between KINGBOARD and InPlay is -0.46. Overlapping area represents the amount of risk that can be diversified away by holding KINGBOARD CHEMICAL and InPlay Oil Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on InPlay Oil Corp 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 InPlay Oil. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of InPlay Oil Corp has no effect on the direction of KINGBOARD CHEMICAL i.e., KINGBOARD CHEMICAL and InPlay Oil go up and down completely randomly.

Pair Corralation between KINGBOARD CHEMICAL and InPlay Oil

Assuming the 90 days trading horizon KINGBOARD CHEMICAL is expected to generate 3.06 times more return on investment than InPlay Oil. However, KINGBOARD CHEMICAL is 3.06 times more volatile than InPlay Oil Corp. It trades about 0.2 of its potential returns per unit of risk. InPlay Oil Corp is currently generating about -0.35 per unit of risk. If you would invest  190.00  in KINGBOARD CHEMICAL on October 1, 2024 and sell it today you would earn a total of  34.00  from holding KINGBOARD CHEMICAL or generate 17.89% return on investment over 90 days.

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

KINGBOARD CHEMICAL  vs.  InPlay Oil Corp

KINGBOARD CHEMICAL

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in KINGBOARD CHEMICAL are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of rather fragile basic indicators, KINGBOARD CHEMICAL exhibited solid returns over the last few months and may actually be approaching a breakup point.

InPlay Oil Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days InPlay Oil Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in January 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with KINGBOARD CHEMICAL and InPlay Oil

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

The idea behind KINGBOARD CHEMICAL and InPlay Oil Corp 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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.