Correlation Between KCC Engineering and Vissem Electronics

Can any of the company-specific risk be diversified away by investing in both KCC Engineering and Vissem Electronics 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 Vissem Electronics 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 Vissem Electronics Co, you can compare the effects of market volatilities on KCC Engineering and Vissem Electronics 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 Vissem Electronics. Check out your portfolio center. Please also check ongoing floating volatility patterns of KCC Engineering and Vissem Electronics.

Diversification Opportunities for KCC Engineering and Vissem Electronics

0.85

Correlation Coefficient

KCC Engineering  Vissem Electronics

Very poor diversification

The 3 months correlation between KCC and Vissem is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding KCC Engineering Construction and Vissem Electronics Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vissem Electronics 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 Vissem Electronics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vissem Electronics has no effect on the direction of KCC Engineering i.e., KCC Engineering and Vissem Electronics go up and down completely randomly.

Pair Corralation between KCC Engineering and Vissem Electronics

Assuming the 90 days trading horizon KCC Engineering Construction is expected to under-perform the Vissem Electronics. But the stock apears to be less risky and, when comparing its historical volatility, KCC Engineering Construction is 1.67 times less risky than Vissem Electronics. The stock trades about -0.05 of its potential returns per unit of risk. The Vissem Electronics Co is currently generating about 0.0 of returns per unit of risk over similar time horizon. If you would invest  444,072  in Vissem Electronics Co on October 10, 2024 and sell it today you would lose (76,072) from holding Vissem Electronics Co or give up 17.13% of portfolio value over 90 days.

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

KCC Engineering Construction  vs.  Vissem Electronics Co

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.

Vissem Electronics

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Vissem Electronics Co 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 Vissem Electronics

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

The idea behind KCC Engineering Construction and Vissem Electronics Co 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.