Correlation Between KINGBOARD CHEMICAL and Compagnie Financière

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

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

Diversification Opportunities for KINGBOARD CHEMICAL and Compagnie Financière

0.81

Correlation Coefficient

KINGBOARD CHEMICAL  Compagnie Financière

Very poor diversification

The 3 months correlation between KINGBOARD and Compagnie is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding KINGBOARD CHEMICAL and Compagnie Financire Richemont in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Compagnie Financière 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 Compagnie Financière. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Compagnie Financière has no effect on the direction of KINGBOARD CHEMICAL i.e., KINGBOARD CHEMICAL and Compagnie Financière go up and down completely randomly.

Pair Corralation between KINGBOARD CHEMICAL and Compagnie Financière

Assuming the 90 days trading horizon KINGBOARD CHEMICAL is expected to generate 1.35 times more return on investment than Compagnie Financière. However, KINGBOARD CHEMICAL is 1.35 times more volatile than Compagnie Financire Richemont. It trades about 0.05 of its potential returns per unit of risk. Compagnie Financire Richemont is currently generating about 0.03 per unit of risk. If you would invest  145.00  in KINGBOARD CHEMICAL on October 24, 2024 and sell it today you would earn a total of  113.00  from holding KINGBOARD CHEMICAL or generate 77.93% return on investment over 90 days.

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

KINGBOARD CHEMICAL  vs.  Compagnie Financire Richemont

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 unsteady basic indicators, KINGBOARD CHEMICAL exhibited solid returns over the last few months and may actually be approaching a breakup point.

Compagnie Financière

Risk-Adjusted Performance

10 of 100

OK

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

Pair Trading with KINGBOARD CHEMICAL and Compagnie Financière

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

The idea behind KINGBOARD CHEMICAL and Compagnie Financire Richemont 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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.