Correlation Between KCC Engineering and DB Financial

Can any of the company-specific risk be diversified away by investing in both KCC Engineering and DB Financial 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 KCC Engineering and DB Financial into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between KCC Engineering Construction and DB Financial Investment, you can compare the effects of market volatilities on KCC Engineering and DB Financial 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 KCC Engineering with a short position of DB Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of KCC Engineering and DB Financial.

Diversification Opportunities for KCC Engineering and DB Financial

0.75

Correlation Coefficient

KCC Engineering  DB Financial

Poor diversification

The 3 months correlation between KCC and 016610 is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding KCC Engineering Construction and DB Financial Investment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on DB Financial Investment and KCC Engineering 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 KCC Engineering Construction are associated (or correlated) with DB Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of DB Financial Investment has no effect on the direction of KCC Engineering i.e., KCC Engineering and DB Financial go up and down completely randomly.

Pair Corralation between KCC Engineering and DB Financial

Assuming the 90 days trading horizon KCC Engineering Construction is expected to generate 0.76 times more return on investment than DB Financial. However, KCC Engineering Construction is 1.31 times less risky than DB Financial. It trades about -0.01 of its potential returns per unit of risk. DB Financial Investment is currently generating about -0.05 per unit of risk. If you would invest  410,297  in KCC Engineering Construction on October 6, 2024 and sell it today you would lose (4,797) from holding KCC Engineering Construction or give up 1.17% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	100.0%
Values	Daily Returns

KCC Engineering Construction  vs.  DB Financial Investment

KCC Engineering Cons

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days KCC Engineering Construction has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, KCC Engineering is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

DB Financial Investment

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days DB Financial Investment has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with KCC Engineering and DB Financial

The main advantage of trading using opposite KCC Engineering and DB Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if KCC Engineering position performs unexpectedly, DB Financial 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 DB Financial will offset losses from the drop in DB Financial's long position.

The idea behind KCC Engineering Construction and DB Financial Investment 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.