Correlation Between IMPERIAL TOBACCO and KINGBOARD CHEMICAL
Can any of the company-specific risk be diversified away by investing in both IMPERIAL TOBACCO and KINGBOARD 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 IMPERIAL TOBACCO and KINGBOARD CHEMICAL into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between IMPERIAL TOBACCO and KINGBOARD CHEMICAL, you can compare the effects of market volatilities on IMPERIAL TOBACCO and KINGBOARD 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 IMPERIAL TOBACCO with a short position of KINGBOARD CHEMICAL. Check out your portfolio center. Please also check ongoing floating volatility patterns of IMPERIAL TOBACCO and KINGBOARD CHEMICAL.
Diversification Opportunities for IMPERIAL TOBACCO and KINGBOARD CHEMICAL
0.58 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between IMPERIAL and KINGBOARD is 0.58. Overlapping area represents the amount of risk that can be diversified away by holding IMPERIAL TOBACCO and KINGBOARD CHEMICAL in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on KINGBOARD CHEMICAL and IMPERIAL TOBACCO 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 IMPERIAL TOBACCO are associated (or correlated) with KINGBOARD CHEMICAL. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of KINGBOARD CHEMICAL has no effect on the direction of IMPERIAL TOBACCO i.e., IMPERIAL TOBACCO and KINGBOARD CHEMICAL go up and down completely randomly.
Pair Corralation between IMPERIAL TOBACCO and KINGBOARD CHEMICAL
Assuming the 90 days trading horizon IMPERIAL TOBACCO is expected to generate 11.43 times less return on investment than KINGBOARD CHEMICAL. But when comparing it to its historical volatility, IMPERIAL TOBACCO is 5.08 times less risky than KINGBOARD CHEMICAL. It trades about 0.11 of its potential returns per unit of risk. KINGBOARD CHEMICAL is currently generating about 0.24 of returns per unit of risk over similar time horizon. If you would invest 186.00 in KINGBOARD CHEMICAL on October 30, 2024 and sell it today you would earn a total of 68.00 from holding KINGBOARD CHEMICAL or generate 36.56% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
IMPERIAL TOBACCO vs. KINGBOARD CHEMICAL
Performance |
| Timeline |
| IMPERIAL TOBACCO |
| KINGBOARD CHEMICAL |
IMPERIAL TOBACCO and KINGBOARD CHEMICAL Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with IMPERIAL TOBACCO and KINGBOARD CHEMICAL
The main advantage of trading using opposite IMPERIAL TOBACCO and KINGBOARD CHEMICAL positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IMPERIAL TOBACCO position performs unexpectedly, KINGBOARD 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 KINGBOARD CHEMICAL will offset losses from the drop in KINGBOARD CHEMICAL's long position.| IMPERIAL TOBACCO vs. Clean Energy Fuels | IMPERIAL TOBACCO vs. BII Railway Transportation | IMPERIAL TOBACCO vs. SALESFORCE INC CDR | IMPERIAL TOBACCO vs. Broadridge Financial Solutions |
| KINGBOARD CHEMICAL vs. Apple Inc | KINGBOARD CHEMICAL vs. Apple Inc | KINGBOARD CHEMICAL vs. Apple Inc | KINGBOARD CHEMICAL vs. Apple Inc |
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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.
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