Correlation Between K Electric and Towellers
Can any of the company-specific risk be diversified away by investing in both K Electric and Towellers 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 K Electric and Towellers into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between K Electric and Towellers, you can compare the effects of market volatilities on K Electric and Towellers 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 K Electric with a short position of Towellers. Check out your portfolio center. Please also check ongoing floating volatility patterns of K Electric and Towellers.
Diversification Opportunities for K Electric and Towellers
0.87 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between KEL and Towellers is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding K Electric and Towellers in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Towellers and K 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 K Electric are associated (or correlated) with Towellers. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Towellers has no effect on the direction of K Electric i.e., K Electric and Towellers go up and down completely randomly.
Pair Corralation between K Electric and Towellers
Assuming the 90 days trading horizon K Electric is expected to generate 1.24 times more return on investment than Towellers. However, K Electric is 1.24 times more volatile than Towellers. It trades about 0.23 of its potential returns per unit of risk. Towellers is currently generating about 0.22 per unit of risk. If you would invest 467.00 in K Electric on August 24, 2024 and sell it today you would earn a total of 72.00 from holding K Electric or generate 15.42% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 95.65% |
| Values | Daily Returns |
K Electric vs. Towellers
Performance |
| Timeline |
| K Electric |
| Towellers |
K Electric and Towellers Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with K Electric and Towellers
The main advantage of trading using opposite K Electric and Towellers positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if K Electric position performs unexpectedly, Towellers 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 Towellers will offset losses from the drop in Towellers' long position.| K Electric vs. Agha Steel Industries | K Electric vs. JS Global Banking | K Electric vs. PICIC Insurance | K Electric vs. Adamjee Insurance |
| Towellers vs. Beco Steel | Towellers vs. Air Link Communication | Towellers vs. WorldCall Telecom | Towellers vs. Murree Brewery |
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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