Correlation Between KCC Engineering and Seoam Machinery

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

Diversification Opportunities for KCC Engineering and Seoam Machinery

0.13

Correlation Coefficient

KCC Engineering  Seoam Machinery

Average diversification

The 3 months correlation between KCC and Seoam is 0.13. Overlapping area represents the amount of risk that can be diversified away by holding KCC Engineering Construction and Seoam Machinery Industry in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Seoam Machinery Industry 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 Seoam Machinery. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Seoam Machinery Industry has no effect on the direction of KCC Engineering i.e., KCC Engineering and Seoam Machinery go up and down completely randomly.

Pair Corralation between KCC Engineering and Seoam Machinery

Assuming the 90 days trading horizon KCC Engineering Construction is expected to generate 0.73 times more return on investment than Seoam Machinery. However, KCC Engineering Construction is 1.38 times less risky than Seoam Machinery. It trades about 0.11 of its potential returns per unit of risk. Seoam Machinery Industry is currently generating about -0.19 per unit of risk. If you would invest  388,500  in KCC Engineering Construction on December 10, 2024 and sell it today you would earn a total of  10,500  from holding KCC Engineering Construction or generate 2.7% return on investment over 90 days.

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

KCC Engineering Construction  vs.  Seoam Machinery Industry

KCC Engineering Cons

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in KCC Engineering Construction are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. 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.

Seoam Machinery Industry

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Seoam Machinery Industry are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Seoam Machinery may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with KCC Engineering and Seoam Machinery

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

The idea behind KCC Engineering Construction and Seoam Machinery Industry 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.