Correlation Between East West and K Electric
Can any of the company-specific risk be diversified away by investing in both East West and K Electric 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 East West and K Electric into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between East West Insurance and K Electric, you can compare the effects of market volatilities on East West and K Electric 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 East West with a short position of K Electric. Check out your portfolio center. Please also check ongoing floating volatility patterns of East West and K Electric.
Diversification Opportunities for East West and K Electric
-0.26 | Correlation Coefficient |
Very good diversification
The 3 months correlation between East and KEL is -0.26. Overlapping area represents the amount of risk that can be diversified away by holding East West Insurance and K Electric in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on K Electric and East West 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 East West Insurance are associated (or correlated) with K Electric. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of K Electric has no effect on the direction of East West i.e., East West and K Electric go up and down completely randomly.
Pair Corralation between East West and K Electric
Assuming the 90 days trading horizon East West is expected to generate 2.11 times less return on investment than K Electric. But when comparing it to its historical volatility, East West Insurance is 1.13 times less risky than K Electric. It trades about 0.15 of its potential returns per unit of risk. K Electric is currently generating about 0.28 of returns per unit of risk over similar time horizon. If you would invest 389.00 in K Electric on September 13, 2024 and sell it today you would earn a total of 251.00 from holding K Electric or generate 64.52% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 79.07% |
| Values | Daily Returns |
East West Insurance vs. K Electric
Performance |
| Timeline |
| East West Insurance |
| K Electric |
East West and K Electric Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with East West and K Electric
The main advantage of trading using opposite East West and K Electric positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if East West position performs unexpectedly, K Electric 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 Electric will offset losses from the drop in K Electric's long position.| East West vs. Habib Insurance | East West vs. Ghandhara Automobile | East West vs. Century Insurance | East West vs. Reliance Weaving Mills |
| K Electric vs. East West Insurance | K Electric vs. Premier Insurance | K Electric vs. Crescent Star Insurance | K Electric vs. Habib Insurance |
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 Dashboard module to portfolio dashboard that provides centralized access to all your investments.
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