Correlation Between Dragonfly and Kmw

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

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

Diversification Opportunities for Dragonfly and Kmw

0.05

Correlation Coefficient

Dragonfly  Kmw

Significant diversification

The 3 months correlation between Dragonfly and Kmw is 0.05. Overlapping area represents the amount of risk that can be diversified away by holding Dragonfly GF Co and Kmw Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kmw Inc and Dragonfly 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 Dragonfly GF Co are associated (or correlated) with Kmw. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kmw Inc has no effect on the direction of Dragonfly i.e., Dragonfly and Kmw go up and down completely randomly.

Pair Corralation between Dragonfly and Kmw

Assuming the 90 days trading horizon Dragonfly GF Co is expected to generate 2.19 times more return on investment than Kmw. However, Dragonfly is 2.19 times more volatile than Kmw Inc. It trades about 0.06 of its potential returns per unit of risk. Kmw Inc is currently generating about 0.13 per unit of risk. If you would invest  118,500  in Dragonfly GF Co on October 25, 2024 and sell it today you would earn a total of  13,000  from holding Dragonfly GF Co or generate 10.97% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	75.41%
Values	Daily Returns

Dragonfly GF Co  vs.  Kmw Inc

Dragonfly GF

Risk-Adjusted Performance

5 of 100

Insignificant

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

Kmw Inc

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Kmw Inc are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Kmw sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Dragonfly and Kmw

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

The idea behind Dragonfly GF Co and Kmw Inc 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.