Correlation Between Aerospace Industrial and K Way
Can any of the company-specific risk be diversified away by investing in both Aerospace Industrial and K Way 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 Aerospace Industrial and K Way into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Aerospace Industrial Development and K Way Information, you can compare the effects of market volatilities on Aerospace Industrial and K Way 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 Aerospace Industrial with a short position of K Way. Check out your portfolio center. Please also check ongoing floating volatility patterns of Aerospace Industrial and K Way.
Diversification Opportunities for Aerospace Industrial and K Way
-0.15 | Correlation Coefficient |
Good diversification
The 3 months correlation between Aerospace and 5201 is -0.15. Overlapping area represents the amount of risk that can be diversified away by holding Aerospace Industrial Developme and K Way Information in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on K Way Information and Aerospace Industrial 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 Aerospace Industrial Development are associated (or correlated) with K Way. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of K Way Information has no effect on the direction of Aerospace Industrial i.e., Aerospace Industrial and K Way go up and down completely randomly.
Pair Corralation between Aerospace Industrial and K Way
Assuming the 90 days trading horizon Aerospace Industrial is expected to generate 20.01 times less return on investment than K Way. But when comparing it to its historical volatility, Aerospace Industrial Development is 2.52 times less risky than K Way. It trades about 0.04 of its potential returns per unit of risk. K Way Information is currently generating about 0.31 of returns per unit of risk over similar time horizon. If you would invest 2,845 in K Way Information on November 7, 2024 and sell it today you would earn a total of 375.00 from holding K Way Information or generate 13.18% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Aerospace Industrial Developme vs. K Way Information
Performance |
| Timeline |
| Aerospace Industrial |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
| K Way Information |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Good
Aerospace Industrial and K Way Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Aerospace Industrial and K Way
The main advantage of trading using opposite Aerospace Industrial and K Way positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Aerospace Industrial position performs unexpectedly, K Way 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 K Way will offset losses from the drop in K Way's long position.The idea behind Aerospace Industrial Development and K Way Information 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.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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.
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