Correlation Between KCI and HB Technology

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

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

Diversification Opportunities for KCI and HB Technology

-0.57

Correlation Coefficient

KCI  HB Technology

Excellent diversification

The 3 months correlation between KCI and 078150 is -0.57. Overlapping area represents the amount of risk that can be diversified away by holding KCI Limited and HB Technology TD in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on HB Technology TD and KCI 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 KCI Limited are associated (or correlated) with HB Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of HB Technology TD has no effect on the direction of KCI i.e., KCI and HB Technology go up and down completely randomly.

Pair Corralation between KCI and HB Technology

Assuming the 90 days trading horizon KCI Limited is expected to under-perform the HB Technology. But the stock apears to be less risky and, when comparing its historical volatility, KCI Limited is 4.91 times less risky than HB Technology. The stock trades about -0.12 of its potential returns per unit of risk. The HB Technology TD is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  194,700  in HB Technology TD on December 28, 2024 and sell it today you would earn a total of  16,300  from holding HB Technology TD or generate 8.37% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	98.28%
Values	Daily Returns

KCI Limited  vs.  HB Technology TD

KCI Limited

Risk-Adjusted Performance

Very Weak

Over the last 90 days KCI Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, KCI is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

HB Technology TD

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in HB Technology TD are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, HB Technology sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with KCI and HB Technology

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

The idea behind KCI Limited and HB Technology TD 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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.