Correlation Between King Strong and Orinko Advanced

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

By analyzing existing cross correlation between King Strong New Material and Orinko Advanced Plastics, you can compare the effects of market volatilities on King Strong and Orinko Advanced 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 King Strong with a short position of Orinko Advanced. Check out your portfolio center. Please also check ongoing floating volatility patterns of King Strong and Orinko Advanced.

Diversification Opportunities for King Strong and Orinko Advanced

0.91

Correlation Coefficient

King Strong  Orinko Advanced

Almost no diversification

The 3 months correlation between King and Orinko is 0.91. Overlapping area represents the amount of risk that can be diversified away by holding King Strong New Material and Orinko Advanced Plastics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Orinko Advanced Plastics and King Strong 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 King Strong New Material are associated (or correlated) with Orinko Advanced. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Orinko Advanced Plastics has no effect on the direction of King Strong i.e., King Strong and Orinko Advanced go up and down completely randomly.

Pair Corralation between King Strong and Orinko Advanced

Assuming the 90 days trading horizon King Strong is expected to generate 27.11 times less return on investment than Orinko Advanced. But when comparing it to its historical volatility, King Strong New Material is 1.32 times less risky than Orinko Advanced. It trades about 0.02 of its potential returns per unit of risk. Orinko Advanced Plastics is currently generating about 0.31 of returns per unit of risk over similar time horizon. If you would invest  965.00  in Orinko Advanced Plastics on September 13, 2024 and sell it today you would earn a total of  285.00  from holding Orinko Advanced Plastics or generate 29.53% return on investment over 90 days.

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

King Strong New Material  vs.  Orinko Advanced Plastics

King Strong New

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in King Strong New Material are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, King Strong sustained solid returns over the last few months and may actually be approaching a breakup point.

Orinko Advanced Plastics

Risk-Adjusted Performance

22 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Orinko Advanced Plastics are ranked lower than 22 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Orinko Advanced sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with King Strong and Orinko Advanced

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

The idea behind King Strong New Material and Orinko Advanced Plastics 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.