Correlation Between Sam Yang and KPX Green
Can any of the company-specific risk be diversified away by investing in both Sam Yang and KPX Green 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 Sam Yang and KPX Green into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Sam Yang Foods and KPX Green Chemical, you can compare the effects of market volatilities on Sam Yang and KPX Green 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 Sam Yang with a short position of KPX Green. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sam Yang and KPX Green.
Diversification Opportunities for Sam Yang and KPX Green
Poor diversification
The 3 months correlation between Sam and KPX is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Sam Yang Foods and KPX Green Chemical in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on KPX Green Chemical and Sam Yang 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 Sam Yang Foods are associated (or correlated) with KPX Green. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of KPX Green Chemical has no effect on the direction of Sam Yang i.e., Sam Yang and KPX Green go up and down completely randomly.
Pair Corralation between Sam Yang and KPX Green
Assuming the 90 days trading horizon Sam Yang Foods is expected to generate 0.47 times more return on investment than KPX Green. However, Sam Yang Foods is 2.13 times less risky than KPX Green. It trades about -0.19 of its potential returns per unit of risk. KPX Green Chemical is currently generating about -0.13 per unit of risk. If you would invest 73,400,000 in Sam Yang Foods on November 7, 2024 and sell it today you would lose (5,000,000) from holding Sam Yang Foods or give up 6.81% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Sam Yang Foods vs. KPX Green Chemical
Performance |
| Timeline |
| Sam Yang Foods |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
OK
| KPX Green Chemical |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
OK
Sam Yang and KPX Green Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Sam Yang and KPX Green
The main advantage of trading using opposite Sam Yang and KPX Green positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sam Yang position performs unexpectedly, KPX Green 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 KPX Green will offset losses from the drop in KPX Green's long position.The idea behind Sam Yang Foods and KPX Green Chemical 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.
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