Correlation Between Kbi Metal and InnoTherapy

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

Diversification Opportunities for Kbi Metal and InnoTherapy

0.46

Correlation Coefficient

Kbi Metal  InnoTherapy

Very weak diversification

The 3 months correlation between Kbi and InnoTherapy is 0.46. Overlapping area represents the amount of risk that can be diversified away by holding Kbi Metal Co and InnoTherapy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on InnoTherapy 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 InnoTherapy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of InnoTherapy has no effect on the direction of Kbi Metal i.e., Kbi Metal and InnoTherapy go up and down completely randomly.

Pair Corralation between Kbi Metal and InnoTherapy

Assuming the 90 days trading horizon Kbi Metal Co is expected to generate 2.2 times more return on investment than InnoTherapy. However, Kbi Metal is 2.2 times more volatile than InnoTherapy. It trades about 0.07 of its potential returns per unit of risk. InnoTherapy is currently generating about 0.08 per unit of risk. If you would invest  197,000  in Kbi Metal Co on November 29, 2024 and sell it today you would earn a total of  25,000  from holding Kbi Metal Co or generate 12.69% return on investment over 90 days.

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

Kbi Metal Co  vs.  InnoTherapy

Kbi Metal

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Kbi Metal Co are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Kbi Metal sustained solid returns over the last few months and may actually be approaching a breakup point.

InnoTherapy

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in InnoTherapy are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, InnoTherapy may actually be approaching a critical reversion point that can send shares even higher in March 2025.

Pair Trading with Kbi Metal and InnoTherapy

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

The idea behind Kbi Metal Co and InnoTherapy 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.