Correlation Between KINGBOARD CHEMICAL and Perdoceo Education

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

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

Diversification Opportunities for KINGBOARD CHEMICAL and Perdoceo Education

0.36

Correlation Coefficient

KINGBOARD CHEMICAL  Perdoceo Education

Weak diversification

The 3 months correlation between KINGBOARD and Perdoceo is 0.36. Overlapping area represents the amount of risk that can be diversified away by holding KINGBOARD CHEMICAL and Perdoceo Education in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Perdoceo Education 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 Perdoceo Education. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Perdoceo Education has no effect on the direction of KINGBOARD CHEMICAL i.e., KINGBOARD CHEMICAL and Perdoceo Education go up and down completely randomly.

Pair Corralation between KINGBOARD CHEMICAL and Perdoceo Education

Assuming the 90 days trading horizon KINGBOARD CHEMICAL is expected to generate 2.57 times less return on investment than Perdoceo Education. In addition to that, KINGBOARD CHEMICAL is 1.47 times more volatile than Perdoceo Education. It trades about 0.05 of its total potential returns per unit of risk. Perdoceo Education is currently generating about 0.17 per unit of volatility. If you would invest  1,940  in Perdoceo Education on October 5, 2024 and sell it today you would earn a total of  560.00  from holding Perdoceo Education or generate 28.87% return on investment over 90 days.

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

KINGBOARD CHEMICAL  vs.  Perdoceo Education

KINGBOARD CHEMICAL

Risk-Adjusted Performance

0 of 100

Modest

Over the last 90 days KINGBOARD CHEMICAL has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather uncertain basic indicators, KINGBOARD CHEMICAL may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Perdoceo Education

Risk-Adjusted Performance

0 of 100

Good

Over the last 90 days Perdoceo Education has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly fragile basic indicators, Perdoceo Education reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with KINGBOARD CHEMICAL and Perdoceo Education

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

The idea behind KINGBOARD CHEMICAL and Perdoceo Education 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.