Correlation Between SCG Packaging and Kingsmen CMTI

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

By analyzing existing cross correlation between SCG Packaging Public and Kingsmen CMTI Public, you can compare the effects of market volatilities on SCG Packaging and Kingsmen CMTI 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 SCG Packaging with a short position of Kingsmen CMTI. Check out your portfolio center. Please also check ongoing floating volatility patterns of SCG Packaging and Kingsmen CMTI.

Diversification Opportunities for SCG Packaging and Kingsmen CMTI

0.89

Correlation Coefficient

SCG Packaging  Kingsmen CMTI

Very poor diversification

The 3 months correlation between SCG and Kingsmen is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding SCG Packaging Public and Kingsmen CMTI Public in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kingsmen CMTI Public and SCG Packaging 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 SCG Packaging Public are associated (or correlated) with Kingsmen CMTI. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kingsmen CMTI Public has no effect on the direction of SCG Packaging i.e., SCG Packaging and Kingsmen CMTI go up and down completely randomly.

Pair Corralation between SCG Packaging and Kingsmen CMTI

Assuming the 90 days trading horizon SCG Packaging Public is expected to under-perform the Kingsmen CMTI. But the stock apears to be less risky and, when comparing its historical volatility, SCG Packaging Public is 1.19 times less risky than Kingsmen CMTI. The stock trades about -0.26 of its potential returns per unit of risk. The Kingsmen CMTI Public is currently generating about -0.08 of returns per unit of risk over similar time horizon. If you would invest  139.00  in Kingsmen CMTI Public on September 27, 2024 and sell it today you would lose (22.00) from holding Kingsmen CMTI Public or give up 15.83% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	98.36%
Values	Daily Returns

SCG Packaging Public  vs.  Kingsmen CMTI Public

SCG Packaging Public

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days SCG Packaging Public has generated negative risk-adjusted returns adding no value to investors with long positions. Despite conflicting performance in the last few months, the Stock's forward-looking signals remain quite persistent which may send shares a bit higher in January 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Kingsmen CMTI Public

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Kingsmen CMTI Public has generated negative risk-adjusted returns adding no value to investors with long positions. Despite conflicting performance in the last few months, the Stock's fundamental drivers remain quite persistent which may send shares a bit higher in January 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Pair Trading with SCG Packaging and Kingsmen CMTI

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

The idea behind SCG Packaging Public and Kingsmen CMTI Public 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.