Correlation Between KPX Green and Lee Ku

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Can any of the company-specific risk be diversified away by investing in both KPX Green and Lee Ku 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 KPX Green and Lee Ku into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between KPX Green Chemical and Lee Ku Industrial, you can compare the effects of market volatilities on KPX Green and Lee Ku 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 KPX Green with a short position of Lee Ku. Check out your portfolio center. Please also check ongoing floating volatility patterns of KPX Green and Lee Ku.

Diversification Opportunities for KPX Green and Lee Ku

0.39
  Correlation Coefficient

Weak diversification

The 3 months correlation between KPX and Lee is 0.39. Overlapping area represents the amount of risk that can be diversified away by holding KPX Green Chemical and Lee Ku Industrial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lee Ku Industrial and KPX Green 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 KPX Green Chemical are associated (or correlated) with Lee Ku. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lee Ku Industrial has no effect on the direction of KPX Green i.e., KPX Green and Lee Ku go up and down completely randomly.

Pair Corralation between KPX Green and Lee Ku

Assuming the 90 days trading horizon KPX Green Chemical is expected to under-perform the Lee Ku. In addition to that, KPX Green is 2.09 times more volatile than Lee Ku Industrial. It trades about -0.13 of its total potential returns per unit of risk. Lee Ku Industrial is currently generating about 0.03 per unit of volatility. If you would invest  411,000  in Lee Ku Industrial on November 7, 2024 and sell it today you would earn a total of  2,500  from holding Lee Ku Industrial or generate 0.61% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Weak
Accuracy100.0%
ValuesDaily Returns

KPX Green Chemical  vs.  Lee Ku Industrial

 Performance 
       Timeline  
KPX Green Chemical 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
OK
Over the last 90 days KPX Green Chemical has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat weak basic indicators, KPX Green sustained solid returns over the last few months and may actually be approaching a breakup point.
Lee Ku Industrial 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Lee Ku Industrial has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Lee Ku is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

KPX Green and Lee Ku Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with KPX Green and Lee Ku

The main advantage of trading using opposite KPX Green and Lee Ku positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if KPX Green position performs unexpectedly, Lee Ku 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 Lee Ku will offset losses from the drop in Lee Ku's long position.
The idea behind KPX Green Chemical and Lee Ku Industrial 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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.

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