Correlation Between Formetal and KPX Chemical
Can any of the company-specific risk be diversified away by investing in both Formetal and KPX 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 Formetal and KPX Chemical into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Formetal Co and KPX Chemical, you can compare the effects of market volatilities on Formetal and KPX 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 Formetal with a short position of KPX Chemical. Check out your portfolio center. Please also check ongoing floating volatility patterns of Formetal and KPX Chemical.
Diversification Opportunities for Formetal and KPX Chemical
-0.02 | Correlation Coefficient |
Good diversification
The 3 months correlation between Formetal and KPX is -0.02. Overlapping area represents the amount of risk that can be diversified away by holding Formetal Co and KPX Chemical in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on KPX Chemical and Formetal 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 Formetal Co are associated (or correlated) with KPX Chemical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of KPX Chemical has no effect on the direction of Formetal i.e., Formetal and KPX Chemical go up and down completely randomly.
Pair Corralation between Formetal and KPX Chemical
Assuming the 90 days trading horizon Formetal Co is expected to generate 2.55 times more return on investment than KPX Chemical. However, Formetal is 2.55 times more volatile than KPX Chemical. It trades about 0.01 of its potential returns per unit of risk. KPX Chemical is currently generating about 0.03 per unit of risk. If you would invest 333,957 in Formetal Co on September 14, 2024 and sell it today you would earn a total of 3,543 from holding Formetal Co or generate 1.06% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Formetal Co vs. KPX Chemical
Performance |
| Timeline |
| Formetal |
| KPX Chemical |
Formetal and KPX Chemical Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Formetal and KPX Chemical
The main advantage of trading using opposite Formetal and KPX Chemical positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Formetal position performs unexpectedly, KPX 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 KPX Chemical will offset losses from the drop in KPX Chemical's long position.| Formetal vs. Rainbow Robotics | Formetal vs. COWINTECH Co | Formetal vs. CS BEARING CoLtd | Formetal vs. Young Poong Precision |
| KPX Chemical vs. Formetal Co | KPX Chemical vs. Songwon Industrial Co | KPX Chemical vs. Digital Power Communications | KPX Chemical vs. Dongwon Metal Co |
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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.
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