Correlation Between Great Western and Kingspan Group
Can any of the company-specific risk be diversified away by investing in both Great Western and Kingspan Group 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 Great Western and Kingspan Group into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Great Western Mining and Kingspan Group plc, you can compare the effects of market volatilities on Great Western and Kingspan Group 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 Great Western with a short position of Kingspan Group. Check out your portfolio center. Please also check ongoing floating volatility patterns of Great Western and Kingspan Group.
Diversification Opportunities for Great Western and Kingspan Group
-0.68 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Great and Kingspan is -0.68. Overlapping area represents the amount of risk that can be diversified away by holding Great Western Mining and Kingspan Group plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kingspan Group plc and Great Western 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 Great Western Mining are associated (or correlated) with Kingspan Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kingspan Group plc has no effect on the direction of Great Western i.e., Great Western and Kingspan Group go up and down completely randomly.
Pair Corralation between Great Western and Kingspan Group
Assuming the 90 days trading horizon Great Western Mining is expected to generate 12.01 times more return on investment than Kingspan Group. However, Great Western is 12.01 times more volatile than Kingspan Group plc. It trades about 0.3 of its potential returns per unit of risk. Kingspan Group plc is currently generating about -0.16 per unit of risk. If you would invest 0.05 in Great Western Mining on August 28, 2024 and sell it today you would earn a total of 0.10 from holding Great Western Mining or generate 200.0% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 95.45% |
| Values | Daily Returns |
Great Western Mining vs. Kingspan Group plc
Performance |
| Timeline |
| Great Western Mining |
| Kingspan Group plc |
Great Western and Kingspan Group Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Great Western and Kingspan Group
The main advantage of trading using opposite Great Western and Kingspan Group positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Great Western position performs unexpectedly, Kingspan Group 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 Kingspan Group will offset losses from the drop in Kingspan Group's long position.| Great Western vs. KLP Aksje Fremvoksende | Great Western vs. Bank of Ireland | Great Western vs. Donegal Investment Group | Great Western vs. Glenveagh Properties PLC |
| Kingspan Group vs. Kerry Group | Kingspan Group vs. Glanbia PLC | Kingspan Group vs. Bank of Ireland | Kingspan Group vs. Dalata Hotel Group |
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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.
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