Correlation Between ABCO Electronics and KMH Hitech
Can any of the company-specific risk be diversified away by investing in both ABCO Electronics and KMH Hitech 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 KMH Hitech 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 KMH Hitech Co, you can compare the effects of market volatilities on ABCO Electronics and KMH Hitech 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 KMH Hitech. Check out your portfolio center. Please also check ongoing floating volatility patterns of ABCO Electronics and KMH Hitech.
Diversification Opportunities for ABCO Electronics and KMH Hitech
0.91 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between ABCO and KMH is 0.91. Overlapping area represents the amount of risk that can be diversified away by holding ABCO Electronics Co and KMH Hitech Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on KMH Hitech 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 KMH Hitech. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of KMH Hitech has no effect on the direction of ABCO Electronics i.e., ABCO Electronics and KMH Hitech go up and down completely randomly.
Pair Corralation between ABCO Electronics and KMH Hitech
Assuming the 90 days trading horizon ABCO Electronics Co is expected to generate 1.59 times more return on investment than KMH Hitech. However, ABCO Electronics is 1.59 times more volatile than KMH Hitech Co. It trades about 0.42 of its potential returns per unit of risk. KMH Hitech Co is currently generating about 0.23 per unit of risk. If you would invest 461,000 in ABCO Electronics Co on October 24, 2024 and sell it today you would earn a total of 107,000 from holding ABCO Electronics Co or generate 23.21% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
ABCO Electronics Co vs. KMH Hitech Co
Performance |
| Timeline |
| ABCO Electronics |
| KMH Hitech |
ABCO Electronics and KMH Hitech Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with ABCO Electronics and KMH Hitech
The main advantage of trading using opposite ABCO Electronics and KMH Hitech positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ABCO Electronics position performs unexpectedly, KMH Hitech 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 KMH Hitech will offset losses from the drop in KMH Hitech's long position.| ABCO Electronics vs. Daishin Balance No8 | ABCO Electronics vs. NAU IB Capital | ABCO Electronics vs. Daishin Balance No | ABCO Electronics vs. Daesung Private Equity |
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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 Bonds Directory module to find actively traded corporate debentures issued by US companies.
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