Correlation Between Lowes Companies and KINGBOARD CHEMICAL
Can any of the company-specific risk be diversified away by investing in both Lowes Companies 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 Lowes Companies and KINGBOARD CHEMICAL into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Lowes Companies and KINGBOARD CHEMICAL, you can compare the effects of market volatilities on Lowes Companies 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 Lowes Companies with a short position of KINGBOARD CHEMICAL. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lowes Companies and KINGBOARD CHEMICAL.
Diversification Opportunities for Lowes Companies and KINGBOARD CHEMICAL
0.69 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Lowes and KINGBOARD is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding Lowes Companies and KINGBOARD CHEMICAL in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on KINGBOARD CHEMICAL and Lowes Companies 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 Lowes Companies 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 Lowes Companies i.e., Lowes Companies and KINGBOARD CHEMICAL go up and down completely randomly.
Pair Corralation between Lowes Companies and KINGBOARD CHEMICAL
Assuming the 90 days horizon Lowes Companies is expected to under-perform the KINGBOARD CHEMICAL. But the stock apears to be less risky and, when comparing its historical volatility, Lowes Companies is 1.0 times less risky than KINGBOARD CHEMICAL. The stock trades about -0.01 of its potential returns per unit of risk. The KINGBOARD CHEMICAL is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest 238.00 in KINGBOARD CHEMICAL on September 13, 2024 and sell it today you would earn a total of 2.00 from holding KINGBOARD CHEMICAL or generate 0.84% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Lowes Companies vs. KINGBOARD CHEMICAL
Performance |
| Timeline |
| Lowes Companies |
| KINGBOARD CHEMICAL |
Lowes Companies and KINGBOARD CHEMICAL Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Lowes Companies and KINGBOARD CHEMICAL
The main advantage of trading using opposite Lowes Companies and KINGBOARD CHEMICAL positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lowes Companies 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.| Lowes Companies vs. Playtech plc | Lowes Companies vs. Canon Marketing Japan | Lowes Companies vs. VIAPLAY GROUP AB | Lowes Companies vs. Fast Retailing Co |
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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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.
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