Correlation Between Kansai Electric and Astra Energy

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Can any of the company-specific risk be diversified away by investing in both Kansai Electric and Astra Energy 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 Kansai Electric and Astra Energy into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Kansai Electric Power and Astra Energy, you can compare the effects of market volatilities on Kansai Electric and Astra Energy 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 Kansai Electric with a short position of Astra Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Kansai Electric and Astra Energy.

Diversification Opportunities for Kansai Electric and Astra Energy

0.8
  Correlation Coefficient

Very poor diversification

The 3 months correlation between Kansai and Astra is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Kansai Electric Power and Astra Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Astra Energy and Kansai Electric 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 Kansai Electric Power are associated (or correlated) with Astra Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Astra Energy has no effect on the direction of Kansai Electric i.e., Kansai Electric and Astra Energy go up and down completely randomly.

Pair Corralation between Kansai Electric and Astra Energy

Assuming the 90 days horizon Kansai Electric is expected to generate 3.14 times less return on investment than Astra Energy. But when comparing it to its historical volatility, Kansai Electric Power is 2.73 times less risky than Astra Energy. It trades about 0.03 of its potential returns per unit of risk. Astra Energy is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  24.00  in Astra Energy on October 24, 2024 and sell it today you would lose (13.00) from holding Astra Energy or give up 54.17% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthStrong
Accuracy99.6%
ValuesDaily Returns

Kansai Electric Power  vs.  Astra Energy

 Performance 
       Timeline  
Kansai Electric Power 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Kansai Electric Power has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of abnormal performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.
Astra Energy 

Risk-Adjusted Performance

1 of 100

 
Weak
 
Strong
Weak
Compared to the overall equity markets, risk-adjusted returns on investments in Astra Energy are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of rather fragile basic indicators, Astra Energy may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Kansai Electric and Astra Energy Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Kansai Electric and Astra Energy

The main advantage of trading using opposite Kansai Electric and Astra Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Kansai Electric position performs unexpectedly, Astra Energy 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 Astra Energy will offset losses from the drop in Astra Energy's long position.
The idea behind Kansai Electric Power and Astra Energy 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.
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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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.

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