Correlation Between Cabot and Kronos Worldwide
Can any of the company-specific risk be diversified away by investing in both Cabot and Kronos Worldwide 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 Cabot and Kronos Worldwide into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Cabot and Kronos Worldwide, you can compare the effects of market volatilities on Cabot and Kronos Worldwide 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 Cabot with a short position of Kronos Worldwide. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cabot and Kronos Worldwide.
Diversification Opportunities for Cabot and Kronos Worldwide
0.69 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Cabot and Kronos is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding Cabot and Kronos Worldwide in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kronos Worldwide and Cabot 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 Cabot are associated (or correlated) with Kronos Worldwide. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kronos Worldwide has no effect on the direction of Cabot i.e., Cabot and Kronos Worldwide go up and down completely randomly.
Pair Corralation between Cabot and Kronos Worldwide
Considering the 90-day investment horizon Cabot is expected to generate 0.88 times more return on investment than Kronos Worldwide. However, Cabot is 1.14 times less risky than Kronos Worldwide. It trades about 0.04 of its potential returns per unit of risk. Kronos Worldwide is currently generating about 0.02 per unit of risk. If you would invest 10,887 in Cabot on August 30, 2024 and sell it today you would earn a total of 172.00 from holding Cabot or generate 1.58% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Cabot vs. Kronos Worldwide
Performance |
| Timeline |
| Cabot |
| Kronos Worldwide |
Cabot and Kronos Worldwide Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Cabot and Kronos Worldwide
The main advantage of trading using opposite Cabot and Kronos Worldwide positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cabot position performs unexpectedly, Kronos Worldwide 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 Kronos Worldwide will offset losses from the drop in Kronos Worldwide's long position.The idea behind Cabot and Kronos Worldwide 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.| Kronos Worldwide vs. Oil Dri | Kronos Worldwide vs. Quaker Chemical | Kronos Worldwide vs. Ecovyst | Kronos Worldwide vs. Minerals Technologies |
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 Equity Valuation module to check real value of public entities based on technical and fundamental data.
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