Correlation Between Gevo and Kurita Water

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

By analyzing existing cross correlation between Gevo Inc and Kurita Water Industries, you can compare the effects of market volatilities on Gevo and Kurita Water 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 Gevo with a short position of Kurita Water. Check out your portfolio center. Please also check ongoing floating volatility patterns of Gevo and Kurita Water.

Diversification Opportunities for Gevo and Kurita Water

0.67

Correlation Coefficient

Gevo  Kurita Water

Poor diversification

The 3 months correlation between Gevo and Kurita is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding Gevo Inc and Kurita Water Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kurita Water Industries and Gevo 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 Gevo Inc are associated (or correlated) with Kurita Water. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kurita Water Industries has no effect on the direction of Gevo i.e., Gevo and Kurita Water go up and down completely randomly.

Pair Corralation between Gevo and Kurita Water

Assuming the 90 days trading horizon Gevo Inc is expected to generate 3.67 times more return on investment than Kurita Water. However, Gevo is 3.67 times more volatile than Kurita Water Industries. It trades about 0.0 of its potential returns per unit of risk. Kurita Water Industries is currently generating about -0.04 per unit of risk. If you would invest  144.00  in Gevo Inc on December 21, 2024 and sell it today you would lose (25.00) from holding Gevo Inc or give up 17.36% of portfolio value over 90 days.

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

Gevo Inc  vs.  Kurita Water Industries

Gevo Inc

Risk-Adjusted Performance

Very Weak

Over the last 90 days Gevo Inc has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Gevo is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Kurita Water Industries

Risk-Adjusted Performance

Very Weak

Over the last 90 days Kurita Water Industries has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with Gevo and Kurita Water

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

The idea behind Gevo Inc and Kurita Water Industries 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.