Correlation Between KRAKATAU STEEL and Quaker Chemical
Can any of the company-specific risk be diversified away by investing in both KRAKATAU STEEL and Quaker Chemical 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 KRAKATAU STEEL and Quaker Chemical into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between KRAKATAU STEEL B and Quaker Chemical, you can compare the effects of market volatilities on KRAKATAU STEEL and Quaker Chemical 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 KRAKATAU STEEL with a short position of Quaker Chemical. Check out your portfolio center. Please also check ongoing floating volatility patterns of KRAKATAU STEEL and Quaker Chemical.
Diversification Opportunities for KRAKATAU STEEL and Quaker Chemical
0.15 | Correlation Coefficient |
Average diversification
The 3 months correlation between KRAKATAU and Quaker is 0.15. Overlapping area represents the amount of risk that can be diversified away by holding KRAKATAU STEEL B and Quaker Chemical in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Quaker Chemical and KRAKATAU STEEL 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 KRAKATAU STEEL B are associated (or correlated) with Quaker Chemical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Quaker Chemical has no effect on the direction of KRAKATAU STEEL i.e., KRAKATAU STEEL and Quaker Chemical go up and down completely randomly.
Pair Corralation between KRAKATAU STEEL and Quaker Chemical
Assuming the 90 days trading horizon KRAKATAU STEEL B is expected to generate 3.23 times more return on investment than Quaker Chemical. However, KRAKATAU STEEL is 3.23 times more volatile than Quaker Chemical. It trades about 0.02 of its potential returns per unit of risk. Quaker Chemical is currently generating about 0.01 per unit of risk. If you would invest 2.75 in KRAKATAU STEEL B on September 13, 2024 and sell it today you would lose (2.15) from holding KRAKATAU STEEL B or give up 78.18% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
KRAKATAU STEEL B vs. Quaker Chemical
Performance |
| Timeline |
| KRAKATAU STEEL B |
| Quaker Chemical |
KRAKATAU STEEL and Quaker Chemical Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with KRAKATAU STEEL and Quaker Chemical
The main advantage of trading using opposite KRAKATAU STEEL and Quaker Chemical positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if KRAKATAU STEEL position performs unexpectedly, Quaker Chemical 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 Quaker Chemical will offset losses from the drop in Quaker Chemical's long position.| KRAKATAU STEEL vs. Apple Inc | KRAKATAU STEEL vs. Apple Inc | KRAKATAU STEEL vs. Apple Inc | KRAKATAU STEEL vs. Apple Inc |
| Quaker Chemical vs. ScanSource | Quaker Chemical vs. BlueScope Steel Limited | Quaker Chemical vs. KRAKATAU STEEL B | Quaker Chemical vs. Khiron Life Sciences |
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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.
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