Correlation Between DC HEALTHCARE and KL Technology

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

By analyzing existing cross correlation between DC HEALTHCARE HOLDINGS and KL Technology, you can compare the effects of market volatilities on DC HEALTHCARE and KL Technology 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 DC HEALTHCARE with a short position of KL Technology. Check out your portfolio center. Please also check ongoing floating volatility patterns of DC HEALTHCARE and KL Technology.

Diversification Opportunities for DC HEALTHCARE and KL Technology

0.08

Correlation Coefficient

DC HEALTHCARE  KL Technology

Significant diversification

The 3 months correlation between 0283 and KLTE is 0.08. Overlapping area represents the amount of risk that can be diversified away by holding DC HEALTHCARE HOLDINGS and KL Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on KL Technology and DC HEALTHCARE 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 DC HEALTHCARE HOLDINGS are associated (or correlated) with KL Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of KL Technology has no effect on the direction of DC HEALTHCARE i.e., DC HEALTHCARE and KL Technology go up and down completely randomly.

Pair Corralation between DC HEALTHCARE and KL Technology

Assuming the 90 days trading horizon DC HEALTHCARE is expected to generate 2.05 times less return on investment than KL Technology. In addition to that, DC HEALTHCARE is 2.95 times more volatile than KL Technology. It trades about 0.02 of its total potential returns per unit of risk. KL Technology is currently generating about 0.11 per unit of volatility. If you would invest  5,906  in KL Technology on September 25, 2024 and sell it today you would earn a total of  496.00  from holding KL Technology or generate 8.4% return on investment over 90 days.

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

DC HEALTHCARE HOLDINGS  vs.  KL Technology

Pair Trading with DC HEALTHCARE and KL Technology

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

The idea behind DC HEALTHCARE HOLDINGS and KL 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.