Correlation Between KINGBOARD CHEMICAL and COSTCO WHOLESALE

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Can any of the company-specific risk be diversified away by investing in both KINGBOARD CHEMICAL and COSTCO WHOLESALE 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 COSTCO WHOLESALE into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between KINGBOARD CHEMICAL and COSTCO WHOLESALE CDR, you can compare the effects of market volatilities on KINGBOARD CHEMICAL and COSTCO WHOLESALE 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 COSTCO WHOLESALE. Check out your portfolio center. Please also check ongoing floating volatility patterns of KINGBOARD CHEMICAL and COSTCO WHOLESALE.

Diversification Opportunities for KINGBOARD CHEMICAL and COSTCO WHOLESALE

0.25
  Correlation Coefficient

Modest diversification

The 3 months correlation between KINGBOARD and COSTCO is 0.25. Overlapping area represents the amount of risk that can be diversified away by holding KINGBOARD CHEMICAL and COSTCO WHOLESALE CDR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on COSTCO WHOLESALE CDR 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 COSTCO WHOLESALE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of COSTCO WHOLESALE CDR has no effect on the direction of KINGBOARD CHEMICAL i.e., KINGBOARD CHEMICAL and COSTCO WHOLESALE go up and down completely randomly.

Pair Corralation between KINGBOARD CHEMICAL and COSTCO WHOLESALE

Assuming the 90 days trading horizon KINGBOARD CHEMICAL is expected to generate 4.7 times more return on investment than COSTCO WHOLESALE. However, KINGBOARD CHEMICAL is 4.7 times more volatile than COSTCO WHOLESALE CDR. It trades about 0.21 of its potential returns per unit of risk. COSTCO WHOLESALE CDR is currently generating about -0.38 per unit of risk. If you would invest  190.00  in KINGBOARD CHEMICAL on October 7, 2024 and sell it today you would earn a total of  36.00  from holding KINGBOARD CHEMICAL or generate 18.95% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Weak
Accuracy100.0%
ValuesDaily Returns

KINGBOARD CHEMICAL  vs.  COSTCO WHOLESALE CDR

 Performance 
       Timeline  
KINGBOARD CHEMICAL 

Risk-Adjusted Performance

2 of 100

 
Weak
 
Strong
Weak
Compared to the overall equity markets, risk-adjusted returns on investments in KINGBOARD CHEMICAL are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. 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.
COSTCO WHOLESALE CDR 

Risk-Adjusted Performance

3 of 100

 
Weak
 
Strong
Insignificant
Compared to the overall equity markets, risk-adjusted returns on investments in COSTCO WHOLESALE CDR are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, COSTCO WHOLESALE is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

KINGBOARD CHEMICAL and COSTCO WHOLESALE Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with KINGBOARD CHEMICAL and COSTCO WHOLESALE

The main advantage of trading using opposite KINGBOARD CHEMICAL and COSTCO WHOLESALE positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if KINGBOARD CHEMICAL position performs unexpectedly, COSTCO WHOLESALE 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 COSTCO WHOLESALE will offset losses from the drop in COSTCO WHOLESALE's long position.
The idea behind KINGBOARD CHEMICAL and COSTCO WHOLESALE CDR 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.

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