Correlation Between ABCO Electronics and Kbi Metal
Can any of the company-specific risk be diversified away by investing in both ABCO Electronics and Kbi Metal 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 ABCO Electronics and Kbi Metal into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between ABCO Electronics Co and Kbi Metal Co, you can compare the effects of market volatilities on ABCO Electronics and Kbi Metal 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 ABCO Electronics with a short position of Kbi Metal. Check out your portfolio center. Please also check ongoing floating volatility patterns of ABCO Electronics and Kbi Metal.
Diversification Opportunities for ABCO Electronics and Kbi Metal
0.91 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between ABCO and Kbi is 0.91. Overlapping area represents the amount of risk that can be diversified away by holding ABCO Electronics Co and Kbi Metal Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kbi Metal and ABCO Electronics 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 ABCO Electronics Co are associated (or correlated) with Kbi Metal. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kbi Metal has no effect on the direction of ABCO Electronics i.e., ABCO Electronics and Kbi Metal go up and down completely randomly.
Pair Corralation between ABCO Electronics and Kbi Metal
Assuming the 90 days trading horizon ABCO Electronics Co is expected to generate 0.95 times more return on investment than Kbi Metal. However, ABCO Electronics Co is 1.05 times less risky than Kbi Metal. It trades about -0.12 of its potential returns per unit of risk. Kbi Metal Co is currently generating about -0.32 per unit of risk. If you would invest 520,000 in ABCO Electronics Co on August 29, 2024 and sell it today you would lose (43,000) from holding ABCO Electronics Co or give up 8.27% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
ABCO Electronics Co vs. Kbi Metal Co
Performance |
| Timeline |
| ABCO Electronics |
| Kbi Metal |
ABCO Electronics and Kbi Metal Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with ABCO Electronics and Kbi Metal
The main advantage of trading using opposite ABCO Electronics and Kbi Metal positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ABCO Electronics position performs unexpectedly, Kbi Metal 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 Kbi Metal will offset losses from the drop in Kbi Metal's long position.| ABCO Electronics vs. Korea Real Estate | ABCO Electronics vs. Korea Ratings Co | ABCO Electronics vs. IQuest Co | ABCO Electronics vs. Wonbang Tech Co |
| Kbi Metal vs. Busan Industrial Co | Kbi Metal vs. Busan Ind | Kbi Metal vs. Mirae Asset Daewoo | Kbi Metal vs. UNISEM Co |
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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.
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