Correlation Between AlzChem Group and Kingspan Group

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

By analyzing existing cross correlation between AlzChem Group AG and Kingspan Group plc, you can compare the effects of market volatilities on AlzChem Group and Kingspan Group 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 AlzChem Group with a short position of Kingspan Group. Check out your portfolio center. Please also check ongoing floating volatility patterns of AlzChem Group and Kingspan Group.

Diversification Opportunities for AlzChem Group and Kingspan Group

-0.69

Correlation Coefficient

AlzChem Group  Kingspan Group

Excellent diversification

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

Pair Corralation between AlzChem Group and Kingspan Group

Assuming the 90 days trading horizon AlzChem Group AG is not expected to generate positive returns. Moreover, AlzChem Group is 1.74 times more volatile than Kingspan Group plc. It trades away all of its potential returns to assume current level of volatility. Kingspan Group plc is currently generating about -0.2 per unit of risk. If you would invest  5,820  in AlzChem Group AG on September 22, 2024 and sell it today you would lose (120.00) from holding AlzChem Group AG or give up 2.06% of portfolio value over 90 days.

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

AlzChem Group AG  vs.  Kingspan Group plc

AlzChem Group AG

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in AlzChem Group AG are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain basic indicators, AlzChem Group exhibited solid returns over the last few months and may actually be approaching a breakup point.

Kingspan Group plc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Kingspan Group plc has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with AlzChem Group and Kingspan Group

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

The idea behind AlzChem Group AG and Kingspan Group plc 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.