Correlation Between Kbi Metal and LAKE MATERIALS

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

Diversification Opportunities for Kbi Metal and LAKE MATERIALS

0.29

Correlation Coefficient

Kbi Metal  LAKE MATERIALS

Modest diversification

The 3 months correlation between Kbi and LAKE is 0.29. Overlapping area represents the amount of risk that can be diversified away by holding Kbi Metal Co and LAKE MATERIALS LTD in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LAKE MATERIALS LTD 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 LAKE MATERIALS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of LAKE MATERIALS LTD has no effect on the direction of Kbi Metal i.e., Kbi Metal and LAKE MATERIALS go up and down completely randomly.

Pair Corralation between Kbi Metal and LAKE MATERIALS

Assuming the 90 days trading horizon Kbi Metal is expected to generate 38.52 times less return on investment than LAKE MATERIALS. But when comparing it to its historical volatility, Kbi Metal Co is 1.22 times less risky than LAKE MATERIALS. It trades about 0.01 of its potential returns per unit of risk. LAKE MATERIALS LTD is currently generating about 0.21 of returns per unit of risk over similar time horizon. If you would invest  1,115,000  in LAKE MATERIALS LTD on December 4, 2024 and sell it today you would earn a total of  760,000  from holding LAKE MATERIALS LTD or generate 68.16% return on investment over 90 days.

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

Kbi Metal Co  vs.  LAKE MATERIALS LTD

Kbi Metal

Risk-Adjusted Performance

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 somewhat strong basic indicators, Kbi Metal is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

LAKE MATERIALS LTD

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in LAKE MATERIALS LTD are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, LAKE MATERIALS sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Kbi Metal and LAKE MATERIALS

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

The idea behind Kbi Metal Co and LAKE MATERIALS LTD 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 Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.