Correlation Between Total Soft and Kmw

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

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

Diversification Opportunities for Total Soft and Kmw

0.1

Correlation Coefficient

Total Soft  Kmw

Average diversification

The 3 months correlation between Total and Kmw is 0.1. Overlapping area represents the amount of risk that can be diversified away by holding Total Soft Bank and Kmw Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kmw Inc and Total Soft 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 Total Soft Bank 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 Total Soft i.e., Total Soft and Kmw go up and down completely randomly.

Pair Corralation between Total Soft and Kmw

Assuming the 90 days trading horizon Total Soft Bank is expected to generate 3.23 times more return on investment than Kmw. However, Total Soft is 3.23 times more volatile than Kmw Inc. It trades about 0.3 of its potential returns per unit of risk. Kmw Inc is currently generating about 0.15 per unit of risk. If you would invest  488,500  in Total Soft Bank on October 1, 2024 and sell it today you would earn a total of  421,500  from holding Total Soft Bank or generate 86.28% return on investment over 90 days.

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

Total Soft Bank  vs.  Kmw Inc

Total Soft Bank

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Total Soft Bank are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Total Soft sustained solid returns over the last few months and may actually be approaching a breakup point.

Kmw Inc

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Kmw Inc are ranked lower than 7 (%) 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 Total Soft and Kmw

The main advantage of trading using opposite Total Soft and Kmw positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Total Soft 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 Total Soft Bank 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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.