Correlation Between Kingspan Group and Datalex

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

By analyzing existing cross correlation between Kingspan Group plc and Datalex, you can compare the effects of market volatilities on Kingspan Group and Datalex 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 Kingspan Group with a short position of Datalex. Check out your portfolio center. Please also check ongoing floating volatility patterns of Kingspan Group and Datalex.

Diversification Opportunities for Kingspan Group and Datalex

-0.12

Correlation Coefficient

Kingspan Group  Datalex

Good diversification

The 3 months correlation between Kingspan and Datalex is -0.12. Overlapping area represents the amount of risk that can be diversified away by holding Kingspan Group plc and Datalex in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Datalex and Kingspan 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 Kingspan Group plc are associated (or correlated) with Datalex. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Datalex has no effect on the direction of Kingspan Group i.e., Kingspan Group and Datalex go up and down completely randomly.

Pair Corralation between Kingspan Group and Datalex

Assuming the 90 days trading horizon Kingspan Group is expected to generate 1.77 times less return on investment than Datalex. But when comparing it to its historical volatility, Kingspan Group plc is 1.33 times less risky than Datalex. It trades about 0.06 of its potential returns per unit of risk. Datalex is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  34.00  in Datalex on January 26, 2025 and sell it today you would earn a total of  6.00  from holding Datalex or generate 17.65% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Kingspan Group plc  vs.  Datalex

Kingspan Group plc

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Kingspan Group plc are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, Kingspan Group may actually be approaching a critical reversion point that can send shares even higher in May 2025.

Datalex

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Datalex are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak technical and fundamental indicators, Datalex reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Kingspan Group and Datalex

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

The idea behind Kingspan Group plc and Datalex 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.