Correlation Between Penta Ocean and KAP AG

Can any of the company-specific risk be diversified away by investing in both Penta Ocean and KAP AG 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 Penta Ocean and KAP AG into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Penta Ocean Construction Co and KAP AG, you can compare the effects of market volatilities on Penta Ocean and KAP AG 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 Penta Ocean with a short position of KAP AG. Check out your portfolio center. Please also check ongoing floating volatility patterns of Penta Ocean and KAP AG.

Diversification Opportunities for Penta Ocean and KAP AG

-0.24

Correlation Coefficient

Penta Ocean  KAP AG

Very good diversification

The 3 months correlation between Penta and KAP is -0.24. Overlapping area represents the amount of risk that can be diversified away by holding Penta Ocean Construction Co and KAP AG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on KAP AG and Penta Ocean 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 Penta Ocean Construction Co are associated (or correlated) with KAP AG. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of KAP AG has no effect on the direction of Penta Ocean i.e., Penta Ocean and KAP AG go up and down completely randomly.

Pair Corralation between Penta Ocean and KAP AG

Assuming the 90 days horizon Penta Ocean is expected to generate 1.11 times less return on investment than KAP AG. But when comparing it to its historical volatility, Penta Ocean Construction Co is 2.13 times less risky than KAP AG. It trades about 0.04 of its potential returns per unit of risk. KAP AG is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  950.00  in KAP AG on April 23, 2025 and sell it today you would earn a total of  5.00  from holding KAP AG or generate 0.53% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.44%
Values	Daily Returns

Penta Ocean Construction Co  vs.  KAP AG

Penta Ocean Construc

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Penta Ocean Construction Co are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Penta Ocean is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

KAP AG

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in KAP AG are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, KAP AG is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Penta Ocean and KAP AG

The main advantage of trading using opposite Penta Ocean and KAP AG positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Penta Ocean position performs unexpectedly, KAP AG 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 KAP AG will offset losses from the drop in KAP AG's long position.

The idea behind Penta Ocean Construction Co and KAP AG 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.

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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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.