Correlation Between 5E Advanced and Kronos Worldwide

Can any of the company-specific risk be diversified away by investing in both 5E Advanced 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 5E Advanced and Kronos Worldwide into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between 5E Advanced Materials and Kronos Worldwide, you can compare the effects of market volatilities on 5E Advanced 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 5E Advanced with a short position of Kronos Worldwide. Check out your portfolio center. Please also check ongoing floating volatility patterns of 5E Advanced and Kronos Worldwide.

Diversification Opportunities for 5E Advanced and Kronos Worldwide

0.19

Correlation Coefficient

5E Advanced  Kronos Worldwide

Average diversification

The 3 months correlation between FEAM and Kronos is 0.19. Overlapping area represents the amount of risk that can be diversified away by holding 5E Advanced Materials and Kronos Worldwide in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kronos Worldwide and 5E Advanced 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 5E Advanced 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 5E Advanced i.e., 5E Advanced and Kronos Worldwide go up and down completely randomly.

Pair Corralation between 5E Advanced and Kronos Worldwide

Given the investment horizon of 90 days 5E Advanced Materials is expected to under-perform the Kronos Worldwide. In addition to that, 5E Advanced is 2.14 times more volatile than Kronos Worldwide. It trades about -0.07 of its total potential returns per unit of risk. Kronos Worldwide is currently generating about 0.03 per unit of volatility. If you would invest  817.00  in Kronos Worldwide on September 5, 2024 and sell it today you would earn a total of  220.00  from holding Kronos Worldwide or generate 26.93% return on investment over 90 days.

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

5E Advanced Materials  vs.  Kronos Worldwide

5E Advanced Materials

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days 5E Advanced Materials has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in January 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

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 5E Advanced and Kronos Worldwide

The main advantage of trading using opposite 5E Advanced and Kronos Worldwide positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if 5E Advanced 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 5E Advanced 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.

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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.