Correlation Between Kenmec Mechanical and Namchow Chemical

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

By analyzing existing cross correlation between Kenmec Mechanical Engineering and Namchow Chemical Industrial, you can compare the effects of market volatilities on Kenmec Mechanical and Namchow 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 Kenmec Mechanical with a short position of Namchow Chemical. Check out your portfolio center. Please also check ongoing floating volatility patterns of Kenmec Mechanical and Namchow Chemical.

Diversification Opportunities for Kenmec Mechanical and Namchow Chemical

0.52

Correlation Coefficient

Kenmec Mechanical  Namchow Chemical

Very weak diversification

The 3 months correlation between Kenmec and Namchow is 0.52. Overlapping area represents the amount of risk that can be diversified away by holding Kenmec Mechanical Engineering and Namchow Chemical Industrial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Namchow Chemical Ind and Kenmec Mechanical 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 Kenmec Mechanical Engineering are associated (or correlated) with Namchow Chemical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Namchow Chemical Ind has no effect on the direction of Kenmec Mechanical i.e., Kenmec Mechanical and Namchow Chemical go up and down completely randomly.

Pair Corralation between Kenmec Mechanical and Namchow Chemical

Assuming the 90 days trading horizon Kenmec Mechanical Engineering is expected to under-perform the Namchow Chemical. In addition to that, Kenmec Mechanical is 1.32 times more volatile than Namchow Chemical Industrial. It trades about -0.04 of its total potential returns per unit of risk. Namchow Chemical Industrial is currently generating about -0.05 per unit of volatility. If you would invest  5,390  in Namchow Chemical Industrial on September 16, 2024 and sell it today you would lose (290.00) from holding Namchow Chemical Industrial or give up 5.38% of portfolio value over 90 days.

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

Kenmec Mechanical Engineering  vs.  Namchow Chemical Industrial

Kenmec Mechanical

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Kenmec Mechanical Engineering has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Kenmec Mechanical is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Namchow Chemical Ind

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Namchow Chemical Industrial has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Namchow Chemical is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with Kenmec Mechanical and Namchow Chemical

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

The idea behind Kenmec Mechanical Engineering and Namchow Chemical Industrial 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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.