Correlation Between WD 40 and Kronos Worldwide

Can any of the company-specific risk be diversified away by investing in both WD 40 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 WD 40 and Kronos Worldwide into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between WD 40 Company and Kronos Worldwide, you can compare the effects of market volatilities on WD 40 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 WD 40 with a short position of Kronos Worldwide. Check out your portfolio center. Please also check ongoing floating volatility patterns of WD 40 and Kronos Worldwide.

Diversification Opportunities for WD 40 and Kronos Worldwide

-0.27

Correlation Coefficient

WD 40  Kronos Worldwide

Very good diversification

The 3 months correlation between WDFC and Kronos is -0.27. Overlapping area represents the amount of risk that can be diversified away by holding WD 40 Company and Kronos Worldwide in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kronos Worldwide and WD 40 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 WD 40 Company 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 WD 40 i.e., WD 40 and Kronos Worldwide go up and down completely randomly.

Pair Corralation between WD 40 and Kronos Worldwide

Given the investment horizon of 90 days WD 40 Company is expected to generate 0.65 times more return on investment than Kronos Worldwide. However, WD 40 Company is 1.54 times less risky than Kronos Worldwide. It trades about 0.04 of its potential returns per unit of risk. Kronos Worldwide is currently generating about -0.04 per unit of risk. If you would invest  25,942  in WD 40 Company on September 15, 2024 and sell it today you would earn a total of  712.00  from holding WD 40 Company or generate 2.74% return on investment over 90 days.

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

WD 40 Company  vs.  Kronos Worldwide

WD 40 Company

Risk-Adjusted Performance

2 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in WD 40 Company are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound technical and fundamental indicators, WD 40 is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

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 WD 40 and Kronos Worldwide

The main advantage of trading using opposite WD 40 and Kronos Worldwide positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if WD 40 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 WD 40 Company 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.