Correlation Between KPX Green and Home Center
Can any of the company-specific risk be diversified away by investing in both KPX Green and Home Center 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 KPX Green and Home Center into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between KPX Green Chemical and Home Center Holdings, you can compare the effects of market volatilities on KPX Green and Home Center 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 KPX Green with a short position of Home Center. Check out your portfolio center. Please also check ongoing floating volatility patterns of KPX Green and Home Center.
Diversification Opportunities for KPX Green and Home Center
0.75 | Correlation Coefficient |
Poor diversification
The 3 months correlation between KPX and Home is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding KPX Green Chemical and Home Center Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Home Center Holdings and KPX Green 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 KPX Green Chemical are associated (or correlated) with Home Center. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Home Center Holdings has no effect on the direction of KPX Green i.e., KPX Green and Home Center go up and down completely randomly.
Pair Corralation between KPX Green and Home Center
Assuming the 90 days trading horizon KPX Green Chemical is expected to generate 1.53 times more return on investment than Home Center. However, KPX Green is 1.53 times more volatile than Home Center Holdings. It trades about 0.25 of its potential returns per unit of risk. Home Center Holdings is currently generating about 0.13 per unit of risk. If you would invest 495,000 in KPX Green Chemical on September 26, 2024 and sell it today you would earn a total of 156,000 from holding KPX Green Chemical or generate 31.52% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Significant |
Accuracy | 95.45% |
Values | Daily Returns |
KPX Green Chemical vs. Home Center Holdings
Performance |
Timeline |
KPX Green Chemical |
Home Center Holdings |
KPX Green and Home Center Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with KPX Green and Home Center
The main advantage of trading using opposite KPX Green and Home Center positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if KPX Green position performs unexpectedly, Home Center 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 Home Center will offset losses from the drop in Home Center's long position.KPX Green vs. Koryo Credit Information | KPX Green vs. Moadata Co | KPX Green vs. PlayD Co | KPX Green vs. LG Display Co |
Home Center vs. LG Chemicals | Home Center vs. POSCO Holdings | Home Center vs. Hanwha Solutions | Home Center vs. Lotte Chemical Corp |
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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.
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