Correlation Between Applied Graphene and Kronos Worldwide

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

By analyzing existing cross correlation between Applied Graphene Materials and Kronos Worldwide, you can compare the effects of market volatilities on Applied Graphene and Kronos Worldwide 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 Applied Graphene with a short position of Kronos Worldwide. Check out your portfolio center. Please also check ongoing floating volatility patterns of Applied Graphene and Kronos Worldwide.

Diversification Opportunities for Applied Graphene and Kronos Worldwide

0.06

Correlation Coefficient

Applied Graphene  Kronos Worldwide

Significant diversification

The 3 months correlation between Applied and Kronos is 0.06. Overlapping area represents the amount of risk that can be diversified away by holding Applied Graphene Materials and Kronos Worldwide in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kronos Worldwide and Applied Graphene 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 Applied Graphene Materials are associated (or correlated) with Kronos Worldwide. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kronos Worldwide has no effect on the direction of Applied Graphene i.e., Applied Graphene and Kronos Worldwide go up and down completely randomly.

Pair Corralation between Applied Graphene and Kronos Worldwide

Assuming the 90 days horizon Applied Graphene Materials is expected to generate 34.84 times more return on investment than Kronos Worldwide. However, Applied Graphene is 34.84 times more volatile than Kronos Worldwide. It trades about 0.08 of its potential returns per unit of risk. Kronos Worldwide is currently generating about -0.05 per unit of risk. If you would invest  1.70  in Applied Graphene Materials on September 5, 2024 and sell it today you would lose (1.69) from holding Applied Graphene Materials or give up 99.41% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	79.2%
Values	Daily Returns

Applied Graphene Materials  vs.  Kronos Worldwide

Applied Graphene Mat

Risk-Adjusted Performance

0 of 100

Very Weak

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

Kronos Worldwide

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Kronos Worldwide has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Kronos Worldwide is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Applied Graphene and Kronos Worldwide

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

The idea behind Applied Graphene Materials and Kronos Worldwide 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 Managers module to screen money managers from public funds and ETFs managed around the world.