Correlation Between KCB GROUP and QUALITY CHEMICAL
Can any of the company-specific risk be diversified away by investing in both KCB GROUP and QUALITY 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 KCB GROUP and QUALITY CHEMICAL into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between KCB GROUP LTD and QUALITY CHEMICAL INDUSTRIES, you can compare the effects of market volatilities on KCB GROUP and QUALITY 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 KCB GROUP with a short position of QUALITY CHEMICAL. Check out your portfolio center. Please also check ongoing floating volatility patterns of KCB GROUP and QUALITY CHEMICAL.
Diversification Opportunities for KCB GROUP and QUALITY CHEMICAL
-0.41 | Correlation Coefficient |
Very good diversification
The 3 months correlation between KCB and QUALITY is -0.41. Overlapping area represents the amount of risk that can be diversified away by holding KCB GROUP LTD and QUALITY CHEMICAL INDUSTRIES in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on QUALITY CHEMICAL IND and KCB GROUP 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 KCB GROUP LTD are associated (or correlated) with QUALITY CHEMICAL. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of QUALITY CHEMICAL IND has no effect on the direction of KCB GROUP i.e., KCB GROUP and QUALITY CHEMICAL go up and down completely randomly.
Pair Corralation between KCB GROUP and QUALITY CHEMICAL
Assuming the 90 days trading horizon KCB GROUP LTD is expected to generate 2.96 times more return on investment than QUALITY CHEMICAL. However, KCB GROUP is 2.96 times more volatile than QUALITY CHEMICAL INDUSTRIES. It trades about 0.19 of its potential returns per unit of risk. QUALITY CHEMICAL INDUSTRIES is currently generating about 0.21 per unit of risk. If you would invest 106,680 in KCB GROUP LTD on August 30, 2024 and sell it today you would earn a total of 5,354 from holding KCB GROUP LTD or generate 5.02% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 95.65% |
| Values | Daily Returns |
KCB GROUP LTD vs. QUALITY CHEMICAL INDUSTRIES
Performance |
| Timeline |
| KCB GROUP LTD |
| QUALITY CHEMICAL IND |
KCB GROUP and QUALITY CHEMICAL Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with KCB GROUP and QUALITY CHEMICAL
The main advantage of trading using opposite KCB GROUP and QUALITY CHEMICAL positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if KCB GROUP position performs unexpectedly, QUALITY 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 QUALITY CHEMICAL will offset losses from the drop in QUALITY CHEMICAL's long position.| KCB GROUP vs. BRITISH AMERICAN TOBACCO | KCB GROUP vs. BANK OF BARODA | KCB GROUP vs. MTN UGANDA LIMITED | KCB GROUP vs. JUBILEE HOLDINGS LIMITED |
| QUALITY CHEMICAL vs. UMEME LIMITED | QUALITY CHEMICAL vs. AIRTEL UGANDA LIMITED | QUALITY CHEMICAL vs. NATION MEDIA GROUP | QUALITY CHEMICAL vs. STANBIC BANK HOLDINGS |
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 Search module to search for actively traded equities including funds and ETFs from over 30 global markets.
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