Correlation Between Koppers Holdings and Gevo

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

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

Diversification Opportunities for Koppers Holdings and Gevo

-0.43

Correlation Coefficient

Koppers Holdings  Gevo

Very good diversification

The 3 months correlation between Koppers and Gevo is -0.43. Overlapping area represents the amount of risk that can be diversified away by holding Koppers Holdings and Gevo Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gevo Inc 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 Gevo. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gevo Inc has no effect on the direction of Koppers Holdings i.e., Koppers Holdings and Gevo go up and down completely randomly.

Pair Corralation between Koppers Holdings and Gevo

Considering the 90-day investment horizon Koppers Holdings is expected to under-perform the Gevo. But the stock apears to be less risky and, when comparing its historical volatility, Koppers Holdings is 3.71 times less risky than Gevo. The stock trades about -0.04 of its potential returns per unit of risk. The Gevo Inc is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  117.00  in Gevo Inc on September 13, 2024 and sell it today you would earn a total of  41.00  from holding Gevo Inc or generate 35.04% return on investment over 90 days.

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

Koppers Holdings  vs.  Gevo Inc

Koppers Holdings

Risk-Adjusted Performance

0 of 100

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.

Gevo Inc

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Gevo Inc are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of very weak basic indicators, Gevo displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Koppers Holdings and Gevo

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

The idea behind Koppers Holdings and Gevo Inc 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.

Check out your portfolio center.

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 Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.