Correlation Between Kbi Metal and Histeel

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

By analyzing existing cross correlation between Kbi Metal Co and Histeel, you can compare the effects of market volatilities on Kbi Metal and Histeel 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 Kbi Metal with a short position of Histeel. Check out your portfolio center. Please also check ongoing floating volatility patterns of Kbi Metal and Histeel.

Diversification Opportunities for Kbi Metal and Histeel

0.86

Correlation Coefficient

Kbi Metal  Histeel

Very poor diversification

The 3 months correlation between Kbi and Histeel is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding Kbi Metal Co and Histeel in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Histeel and Kbi Metal 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 Kbi Metal Co are associated (or correlated) with Histeel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Histeel has no effect on the direction of Kbi Metal i.e., Kbi Metal and Histeel go up and down completely randomly.

Pair Corralation between Kbi Metal and Histeel

Assuming the 90 days trading horizon Kbi Metal Co is expected to generate 1.53 times more return on investment than Histeel. However, Kbi Metal is 1.53 times more volatile than Histeel. It trades about 0.05 of its potential returns per unit of risk. Histeel is currently generating about 0.0 per unit of risk. If you would invest  147,500  in Kbi Metal Co on September 25, 2024 and sell it today you would earn a total of  57,000  from holding Kbi Metal Co or generate 38.64% return on investment over 90 days.

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

Kbi Metal Co  vs.  Histeel

Kbi Metal

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Kbi Metal Co has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Histeel

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Histeel 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 Kbi Metal and Histeel

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

The idea behind Kbi Metal Co and Histeel 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.