Correlation Between Spectrum Brands and Kingboard Chemical

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

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

Diversification Opportunities for Spectrum Brands and Kingboard Chemical

-0.69

Correlation Coefficient

Spectrum Brands  Kingboard Chemical

Excellent diversification

The 3 months correlation between Spectrum and Kingboard is -0.69. Overlapping area represents the amount of risk that can be diversified away by holding Spectrum Brands Holdings and Kingboard Chemical Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kingboard Chemical and Spectrum Brands 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 Spectrum Brands Holdings are associated (or correlated) with Kingboard Chemical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kingboard Chemical has no effect on the direction of Spectrum Brands i.e., Spectrum Brands and Kingboard Chemical go up and down completely randomly.

Pair Corralation between Spectrum Brands and Kingboard Chemical

Considering the 90-day investment horizon Spectrum Brands Holdings is expected to generate 1.25 times more return on investment than Kingboard Chemical. However, Spectrum Brands is 1.25 times more volatile than Kingboard Chemical Holdings. It trades about 0.05 of its potential returns per unit of risk. Kingboard Chemical Holdings is currently generating about -0.02 per unit of risk. If you would invest  5,940  in Spectrum Brands Holdings on October 10, 2024 and sell it today you would earn a total of  2,452  from holding Spectrum Brands Holdings or generate 41.28% return on investment over 90 days.

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

Spectrum Brands Holdings  vs.  Kingboard Chemical Holdings

Spectrum Brands Holdings

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Spectrum Brands Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Spectrum Brands is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Kingboard Chemical

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Kingboard Chemical Holdings are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong fundamental indicators, Kingboard Chemical is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Spectrum Brands and Kingboard Chemical

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

The idea behind Spectrum Brands Holdings and Kingboard Chemical Holdings 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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.