Correlation Between KCC Engineering and KG Eco

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

Diversification Opportunities for KCC Engineering and KG Eco

0.82

Correlation Coefficient

KCC Engineering  KG Eco

Very poor diversification

The 3 months correlation between KCC and 151860 is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding KCC Engineering Construction and KG Eco Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on KG Eco Technology 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 KG Eco. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of KG Eco Technology has no effect on the direction of KCC Engineering i.e., KCC Engineering and KG Eco go up and down completely randomly.

Pair Corralation between KCC Engineering and KG Eco

Assuming the 90 days trading horizon KCC Engineering Construction is expected to generate 0.45 times more return on investment than KG Eco. However, KCC Engineering Construction is 2.23 times less risky than KG Eco. It trades about -0.05 of its potential returns per unit of risk. KG Eco Technology is currently generating about -0.03 per unit of risk. If you would invest  658,192  in KCC Engineering Construction on October 4, 2024 and sell it today you would lose (257,692) from holding KCC Engineering Construction or give up 39.15% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	99.79%
Values	Daily Returns

KCC Engineering Construction  vs.  KG Eco Technology

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 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.

KG Eco Technology

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days KG Eco Technology 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 KG Eco

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

The idea behind KCC Engineering Construction and KG Eco Technology 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.