Correlation Between System and Kbi Metal
Can any of the company-specific risk be diversified away by investing in both System 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 System and Kbi Metal into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between System and Application and Kbi Metal Co, you can compare the effects of market volatilities on System 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 System with a short position of Kbi Metal. Check out your portfolio center. Please also check ongoing floating volatility patterns of System and Kbi Metal.
Diversification Opportunities for System and Kbi Metal
Significant diversification
The 3 months correlation between System and Kbi is 0.07. Overlapping area represents the amount of risk that can be diversified away by holding System and Application and Kbi Metal Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kbi Metal and System 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 System and Application 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 System i.e., System and Kbi Metal go up and down completely randomly.
Pair Corralation between System and Kbi Metal
Assuming the 90 days trading horizon System and Application is expected to under-perform the Kbi Metal. But the stock apears to be less risky and, when comparing its historical volatility, System and Application is 1.94 times less risky than Kbi Metal. The stock trades about -0.05 of its potential returns per unit of risk. The Kbi Metal Co is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest 140,100 in Kbi Metal Co on November 8, 2024 and sell it today you would earn a total of 71,900 from holding Kbi Metal Co or generate 51.32% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
System and Application vs. Kbi Metal Co
Performance |
| Timeline |
| System and Application |
| Kbi Metal |
System and Kbi Metal Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with System and Kbi Metal
The main advantage of trading using opposite System and Kbi Metal positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if System 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.| System vs. SM Entertainment Co | System vs. JYP Entertainment Corp | System vs. Narae Nanotech Corp | System vs. Lion Chemtech Co |
| Kbi Metal vs. Korea Petro Chemical | Kbi Metal vs. Dongbang Transport Logistics | Kbi Metal vs. Alton Sports CoLtd | Kbi Metal vs. Hanjin Transportation 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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.
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