Correlation Between Settlebank and KCI
Can any of the company-specific risk be diversified away by investing in both Settlebank and KCI 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 Settlebank and KCI into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Settlebank and KCI Limited, you can compare the effects of market volatilities on Settlebank and KCI 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 Settlebank with a short position of KCI. Check out your portfolio center. Please also check ongoing floating volatility patterns of Settlebank and KCI.
Diversification Opportunities for Settlebank and KCI
0.79 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Settlebank and KCI is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding Settlebank and KCI Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on KCI Limited and Settlebank 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 Settlebank are associated (or correlated) with KCI. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of KCI Limited has no effect on the direction of Settlebank i.e., Settlebank and KCI go up and down completely randomly.
Pair Corralation between Settlebank and KCI
Assuming the 90 days trading horizon Settlebank is expected to under-perform the KCI. In addition to that, Settlebank is 1.07 times more volatile than KCI Limited. It trades about -0.39 of its total potential returns per unit of risk. KCI Limited is currently generating about -0.17 per unit of volatility. If you would invest 736,000 in KCI Limited on September 12, 2024 and sell it today you would lose (74,000) from holding KCI Limited or give up 10.05% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Settlebank vs. KCI Limited
Performance |
| Timeline |
| Settlebank |
| KCI Limited |
Settlebank and KCI Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Settlebank and KCI
The main advantage of trading using opposite Settlebank and KCI positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Settlebank position performs unexpectedly, KCI 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 KCI will offset losses from the drop in KCI's long position.| Settlebank vs. Daishin Information Communications | Settlebank vs. Solution Advanced Technology | Settlebank vs. Busan Industrial Co | Settlebank vs. Busan Ind |
| KCI vs. TOPMATERIAL LTD | KCI vs. Hyosung Advanced Materials | KCI vs. Chin Yang Chemical | KCI vs. EV Advanced Material |
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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