Correlation Between Koppers Holdings and Element Solutions

Can any of the company-specific risk be diversified away by investing in both Koppers Holdings and Element Solutions 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 Koppers Holdings and Element Solutions into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Koppers Holdings and Element Solutions, you can compare the effects of market volatilities on Koppers Holdings and Element Solutions 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 Koppers Holdings with a short position of Element Solutions. Check out your portfolio center. Please also check ongoing floating volatility patterns of Koppers Holdings and Element Solutions.

Diversification Opportunities for Koppers Holdings and Element Solutions

0.57

Correlation Coefficient

Koppers Holdings  Element Solutions

Very weak diversification

The 3 months correlation between Koppers and Element is 0.57. Overlapping area represents the amount of risk that can be diversified away by holding Koppers Holdings and Element Solutions in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Element Solutions and Koppers Holdings 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 Koppers Holdings are associated (or correlated) with Element Solutions. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Element Solutions has no effect on the direction of Koppers Holdings i.e., Koppers Holdings and Element Solutions go up and down completely randomly.

Pair Corralation between Koppers Holdings and Element Solutions

Considering the 90-day investment horizon Koppers Holdings is expected to under-perform the Element Solutions. In addition to that, Koppers Holdings is 1.62 times more volatile than Element Solutions. It trades about 0.0 of its total potential returns per unit of risk. Element Solutions is currently generating about 0.06 per unit of volatility. If you would invest  2,524  in Element Solutions on December 19, 2024 and sell it today you would earn a total of  108.00  from holding Element Solutions or generate 4.28% return on investment over 90 days.

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

Koppers Holdings  vs.  Element Solutions

Koppers Holdings

Risk-Adjusted Performance

Very Weak

Over the last 90 days Koppers Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable basic indicators, Koppers Holdings is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

Element Solutions

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Element Solutions are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite fairly strong basic indicators, Element Solutions is not utilizing all of its potentials. The latest stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with Koppers Holdings and Element Solutions

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

The idea behind Koppers Holdings and Element Solutions 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 Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.