Correlation Between Kbi Metal and GiantStep

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

Diversification Opportunities for Kbi Metal and GiantStep

0.27

Correlation Coefficient

Kbi Metal  GiantStep

Modest diversification

The 3 months correlation between Kbi and GiantStep is 0.27. Overlapping area represents the amount of risk that can be diversified away by holding Kbi Metal Co and GiantStep Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GiantStep 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 GiantStep. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GiantStep has no effect on the direction of Kbi Metal i.e., Kbi Metal and GiantStep go up and down completely randomly.

Pair Corralation between Kbi Metal and GiantStep

Assuming the 90 days trading horizon Kbi Metal Co is expected to under-perform the GiantStep. But the stock apears to be less risky and, when comparing its historical volatility, Kbi Metal Co is 1.01 times less risky than GiantStep. The stock trades about -0.06 of its potential returns per unit of risk. The GiantStep Co is currently generating about -0.03 of returns per unit of risk over similar time horizon. If you would invest  666,000  in GiantStep Co on October 27, 2024 and sell it today you would lose (89,000) from holding GiantStep Co or give up 13.36% of portfolio value over 90 days.

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

Kbi Metal Co  vs.  GiantStep Co

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 February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

GiantStep

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days GiantStep Co 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 GiantStep

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

The idea behind Kbi Metal Co and GiantStep Co 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.