Correlation Between K W and Nex Point
Can any of the company-specific risk be diversified away by investing in both K W and Nex Point 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 W and Nex Point into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between K W Metal and Nex Point Public, you can compare the effects of market volatilities on K W and Nex Point 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 W with a short position of Nex Point. Check out your portfolio center. Please also check ongoing floating volatility patterns of K W and Nex Point.
Diversification Opportunities for K W and Nex Point
Poor diversification
The 3 months correlation between KWM and Nex is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding K W Metal and Nex Point Public in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nex Point Public and K W 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 W Metal are associated (or correlated) with Nex Point. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nex Point Public has no effect on the direction of K W i.e., K W and Nex Point go up and down completely randomly.
Pair Corralation between K W and Nex Point
Assuming the 90 days trading horizon K W Metal is expected to generate 0.37 times more return on investment than Nex Point. However, K W Metal is 2.73 times less risky than Nex Point. It trades about -0.09 of its potential returns per unit of risk. Nex Point Public is currently generating about -0.23 per unit of risk. If you would invest 135.00 in K W Metal on September 3, 2024 and sell it today you would lose (8.00) from holding K W Metal or give up 5.93% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
K W Metal vs. Nex Point Public
Performance |
| Timeline |
| K W Metal |
| Nex Point Public |
K W and Nex Point Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with K W and Nex Point
The main advantage of trading using opposite K W and Nex Point positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if K W position performs unexpectedly, Nex Point 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 Nex Point will offset losses from the drop in Nex Point's long position.| K W vs. Infraset Public | K W vs. KC Metalsheet Public | K W vs. DOD Biotech Public | K W vs. Jay Mart Public |
| Nex Point vs. Jay Mart Public | Nex Point vs. KCE Electronics Public | Nex Point vs. Hana Microelectronics Public | Nex Point vs. Energy Absolute Public |
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 Transaction History module to view history of all your transactions and understand their impact on performance.
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