Correlation Between Kingspan Group and Origin Enterprises

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

By analyzing existing cross correlation between Kingspan Group plc and Origin Enterprises Plc, you can compare the effects of market volatilities on Kingspan Group and Origin Enterprises 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 Kingspan Group with a short position of Origin Enterprises. Check out your portfolio center. Please also check ongoing floating volatility patterns of Kingspan Group and Origin Enterprises.

Diversification Opportunities for Kingspan Group and Origin Enterprises

0.64

Correlation Coefficient

Kingspan Group  Origin Enterprises

Poor diversification

The 3 months correlation between Kingspan and Origin is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding Kingspan Group plc and Origin Enterprises Plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Origin Enterprises Plc and Kingspan Group 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 Kingspan Group plc are associated (or correlated) with Origin Enterprises. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Origin Enterprises Plc has no effect on the direction of Kingspan Group i.e., Kingspan Group and Origin Enterprises go up and down completely randomly.

Pair Corralation between Kingspan Group and Origin Enterprises

Assuming the 90 days trading horizon Kingspan Group plc is expected to generate 0.98 times more return on investment than Origin Enterprises. However, Kingspan Group plc is 1.02 times less risky than Origin Enterprises. It trades about 0.05 of its potential returns per unit of risk. Origin Enterprises Plc is currently generating about 0.0 per unit of risk. If you would invest  7,160  in Kingspan Group plc on November 28, 2024 and sell it today you would earn a total of  350.00  from holding Kingspan Group plc or generate 4.89% return on investment over 90 days.

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

Kingspan Group plc  vs.  Origin Enterprises Plc

Kingspan Group plc

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Kingspan Group plc are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, Kingspan Group may actually be approaching a critical reversion point that can send shares even higher in March 2025.

Origin Enterprises Plc

Risk-Adjusted Performance

Very Weak

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

Pair Trading with Kingspan Group and Origin Enterprises

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

The idea behind Kingspan Group plc and Origin Enterprises Plc 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 Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.