Correlation Between KINGBOARD CHEMICAL and AIR PRODCHEMICALS
Can any of the company-specific risk be diversified away by investing in both KINGBOARD CHEMICAL and AIR PRODCHEMICALS 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 KINGBOARD CHEMICAL and AIR PRODCHEMICALS into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between KINGBOARD CHEMICAL and AIR PRODCHEMICALS, you can compare the effects of market volatilities on KINGBOARD CHEMICAL and AIR PRODCHEMICALS 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 KINGBOARD CHEMICAL with a short position of AIR PRODCHEMICALS. Check out your portfolio center. Please also check ongoing floating volatility patterns of KINGBOARD CHEMICAL and AIR PRODCHEMICALS.
Diversification Opportunities for KINGBOARD CHEMICAL and AIR PRODCHEMICALS
0.79 | Correlation Coefficient |
Poor diversification
The 3 months correlation between KINGBOARD and AIR is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding KINGBOARD CHEMICAL and AIR PRODCHEMICALS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AIR PRODCHEMICALS and KINGBOARD CHEMICAL 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 KINGBOARD CHEMICAL are associated (or correlated) with AIR PRODCHEMICALS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AIR PRODCHEMICALS has no effect on the direction of KINGBOARD CHEMICAL i.e., KINGBOARD CHEMICAL and AIR PRODCHEMICALS go up and down completely randomly.
Pair Corralation between KINGBOARD CHEMICAL and AIR PRODCHEMICALS
Assuming the 90 days trading horizon KINGBOARD CHEMICAL is expected to generate 2.16 times more return on investment than AIR PRODCHEMICALS. However, KINGBOARD CHEMICAL is 2.16 times more volatile than AIR PRODCHEMICALS. It trades about 0.09 of its potential returns per unit of risk. AIR PRODCHEMICALS is currently generating about 0.15 per unit of risk. If you would invest 149.00 in KINGBOARD CHEMICAL on August 27, 2024 and sell it today you would earn a total of 85.00 from holding KINGBOARD CHEMICAL or generate 57.05% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
KINGBOARD CHEMICAL vs. AIR PRODCHEMICALS
Performance |
| Timeline |
| KINGBOARD CHEMICAL |
| AIR PRODCHEMICALS |
KINGBOARD CHEMICAL and AIR PRODCHEMICALS Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with KINGBOARD CHEMICAL and AIR PRODCHEMICALS
The main advantage of trading using opposite KINGBOARD CHEMICAL and AIR PRODCHEMICALS positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if KINGBOARD CHEMICAL position performs unexpectedly, AIR PRODCHEMICALS 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 AIR PRODCHEMICALS will offset losses from the drop in AIR PRODCHEMICALS's long position.| KINGBOARD CHEMICAL vs. Apple Inc | KINGBOARD CHEMICAL vs. Apple Inc | KINGBOARD CHEMICAL vs. Apple Inc | KINGBOARD CHEMICAL vs. Microsoft |
| AIR PRODCHEMICALS vs. Apple Inc | AIR PRODCHEMICALS vs. Apple Inc | AIR PRODCHEMICALS vs. Apple Inc | AIR PRODCHEMICALS vs. Microsoft |
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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.
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