Correlation Between Kmw and ABL Bio

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

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

Diversification Opportunities for Kmw and ABL Bio

-0.34

Correlation Coefficient

Kmw  ABL Bio

Very good diversification

The 3 months correlation between Kmw and ABL is -0.34. Overlapping area represents the amount of risk that can be diversified away by holding Kmw Inc and ABL Bio in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ABL Bio and Kmw 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 Kmw Inc are associated (or correlated) with ABL Bio. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ABL Bio has no effect on the direction of Kmw i.e., Kmw and ABL Bio go up and down completely randomly.

Pair Corralation between Kmw and ABL Bio

Assuming the 90 days trading horizon Kmw Inc is expected to under-perform the ABL Bio. But the stock apears to be less risky and, when comparing its historical volatility, Kmw Inc is 1.35 times less risky than ABL Bio. The stock trades about -0.06 of its potential returns per unit of risk. The ABL Bio is currently generating about -0.03 of returns per unit of risk over similar time horizon. If you would invest  2,765,000  in ABL Bio on September 22, 2024 and sell it today you would lose (125,000) from holding ABL Bio or give up 4.52% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	95.65%
Values	Daily Returns

Kmw Inc  vs.  ABL Bio

Kmw Inc

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Kmw Inc are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Kmw may actually be approaching a critical reversion point that can send shares even higher in January 2025.

ABL Bio

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days ABL Bio 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 January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Kmw and ABL Bio

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

The idea behind Kmw Inc and ABL Bio 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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.